PETROLEUM PRODUCT PRICE ANALYSIS BY ROLAND E. IDIMI 


The rising price of crude oil in the international market has set in motion harsh economy for the Nigerian people due to the consequential increase in the price of Petroleum products if the market is open and deregulated without subsidy.

At a forecast price of 70 USD per barrel of crude oil in 2018, the price of 1 litre of crude oil at an exchange rate of 360 Naira to a dollar will be

= 70 x 360 / 159 = 158 Naira (1 litre of crude oil)

A refinery is designed to buy crude oil, refine it and sell to make a profit.

If you add refining cost, logistic cost and profits to 158 Naira, a refined petroleum product would sell within 180 Naira to 250 Naira per litre. This is the economic reality at the moment.

The options of the Government at this time are limited to:

1. Start paying subsidy on petroleum products to be sold at a fixed price (eg PMS 145 Naira per litre)

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2. Allow the price to be determined by market forces with a consequential increase of the price of Petroleum product to the range of 180 Naira to 250 Naira per litre.

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