High Cost of Diesel Raises Concern over Sustainability of Petrol Price

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By Ejiofor Alike

As oil marketing and trading companies hiked the price of diesel, citing the current scarcity of foreign exchange, concern has been raised on the long term sustainability of the new pump price of petrol.

THISDAY checks revealed that marketers hide under the cover of deregulation to raise the price of diesel with most marketers selling at over N160 per litre at the depots at the weekend, while the pump price was over N180 per litre in some filling stations.

Having been deregulated, the price of diesel is not under the control of the government as marketers sell according to the forces of demand and supply.

However, the marketers have raised the price citing the scarcity of foreign exchange, thus fueling concern on the sustainability of the N145 per litre price of petrol.

THISDAY’s market survey showed that a litre of diesel was sold for N165 at the Aiteo Depot; N163 at Fatgbems; N162 at Gulf Treasure; N165 at Ibakem; N165 at Ibeto; N163.50 at MRS; N160.50 at Obat Petroleum; N163.50 at Kata; N164 per litre at Sahara Energy and N160 at Rahamaniyya.

The price of diesel was much more higher at the depots owned by the major marketers – Forte Oil, Conoil, Mobil, Oando, MRS and Total, as one litre was sold between N165 and N180 at their depots at the weekend.
The chief executive officer of one of the oil trading companies, who declined to be quoted, denied any form of deliberate hike, saying at the weekend that deregulation means “selling at any price that is acceptable to the buyer and seller.”

“Marketers who hide the cover of deregulation to sell at very high cost risk losing their customers to competitors. That diesel is deregulated does not mean I should sell at any price because my competitors are there and customers have a choice,” he explained

With the high cost of diesel, concern has been raised that the marketers may flout the new retail price band for petrol, citing the challenge of accessing forex at the parallel market.

Already, some of the marketers have flouted the ex-depot price band by selling above the government recommended ex-depot price.

Executive Secretary of the Major Oil Marketers of Nigeria (MOMAN), Mr. Obafemi Olawore had argued that but for the support being provided by the international oil companies (IOCs) in the supply of foreign exchange under an arrangement brokered by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, the major marketers would have found it very difficult to access forex at reasonable price.

“ExxonMobil supported Mobil; Total Upstream support Total; Shell supported Conoil; Agip is supposed to support Oando because Unipetrol bought Agip downstream, which became Oando; NNPC is supposed to support Forte Oil and MRS,” Olawore said.

He added despite the support, the marketers were still experiencing serious challenges because of the high cost of foreign.
According to him, while the N145 per litre pump price was based on exchange rate of N285 per dollar, the major marketers are sourcing for dollar at N320, which translates to N165 per litre.

Olawore, however, revealed that the recent price adjustment was a big incentive to investors, who are now discussing the possibility of making investments in private refineries.

He called on the federal government to avoid policy reversal to boost investment in the downstream sector.