Consumers desperate for relief from the scourge of sky-high petrol prices won’t get it soon, if the latest forecast from Goldman Sachs commodity analysts is anything to go by.
In an update to their outlook for oil prices over the next 12-18 months, the team at Goldman warned that they now expect oil prices, measured by the Brent crude international benchmark to rise to nearly $140 a barrel as early as the next few weeks.
The prediction came just as the national electricity grid in Nigeria collapsed again yesterday, even as a handful of power Distribution Companies (Discos) apologised to the customers in their various franchise areas.
The price of oil and gas has already surged more than 50 per cent so far this year, driving up the average price of goods and services and causing inflation in many parts of the world.
In Nigeria for instance, the price of cooking gas also known as Liquefied Petroleum Gas (LPG) has soared by over 100 per cent in the last one year while the prices of diesel, jet fuel and kerosene have skyrocketed, increasing by as much as 200 per cent in some cases.
But for petrol, Nigeria has continued to subsidise the product, which generally still sells for ₦165 per litre nationwide, although it could more than double that price without the payment of what the government terms under-recovery.
This year alone, the federal government is paying roughly 25 per cent of the entire year’s budget on subsidies after it deferred its removal by about 18 months, citing its expected negative impact on the poor as the reason.
Despite the growing international price of oil, Nigeria has been unable to take advantage because it’s not able to produce the quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC).
In addition, the country does not refine a drop of the products it consumes and therefore spends its scarce foreign exchange to import the products amid a weakening dollar/naira environment.
Other countries of the world also affected negatively by the soaring fuel prices include the United States, for instance, which has now hit a record of nearly $5 a gallon as oil futures for both Brent and WTI crude were trading near $120 a barrel at the end of the week.
Although the longest global oil supply deficit on record ended in April after nearly two years, the Goldman team said it expects a resurgence in Chinese demand will more than offset the surprising durability of Russian crude exports.
“Oil’s structural deficit therefore remains unresolved, with in fact an even tighter oil market through April than we had expected. Supply remains inelastic to higher prices,” the Goldman team wrote.
Major oil producers have limited capacity to ramp production further in the near term and those that do have the spare capacity will likely be hesitant to fully use it due to a lack of exemptions from OPEC+ drilling quotas, the Goldman Sachs group said.
While OPEC+ agreed during its June meeting to boost production, members’ ability to aggressively accelerate drilling faces several challenges.
One is that drilling activity has languished at half of its level from the first quarter of 2020 for the past 18 months, and any surge in production would likely take months to implement. Another is the lack of an exemption for Russia from its OPEC+ quota at the June meeting.
According to the Goldman team, this would suggest that the few OPEC+ members who have capacity to spare won’t be allowed to compensate for the looming jump in demand from China.
The lack of sufficient spare capacity represents a binding constraint for OPEC+ members trying to pick up the slack as Europe turns away from Russian crude, a report by Market Watch stated, noting that energy stocks will continue to outperform expectations.
Earlier in the year, the price of Brent, Nigeria’s benchmark oil briefly hit a record $139 and has since remained above $100, a development rarely experienced in the international oil market.
National Power Grid Collapses Again as Discos Apologise
Meanwhile, Nigeria’s national electricity grid collapsed again on Sunday, even as a handful of power Discos apologised to the customers in their various franchise areas.
Power distributors across the country, including the Eko, Kaduna and Abuja companies in messages sent to consumers, said they had not been able to receive bulk electricity from the national suppliers.
THISDAY gathered that the latest incident was about the fourth publicly announced collapse in recent times and occurred at about 6.49pm, again throwing the nation into total darkness.
The Abuja Disco which oversees Abuja, Kogi, Nasarawa and Niger states, however appealed to its customers for understanding as it was working with stakeholders to fix the problem.
“Please be informed that the current power outage is due to a system failure from the national grid. The system collapsed at about 6.49 pm today 12th June, 2022, causing the outage currently being experienced.
“We appeal for your understanding as all stakeholders are working hard to restore normal supply,” it stated.
On its part, Kaduna Disco also attributed the blackout to lack of supply, assuring its customers that power would be restored as soon as possible.
“We regret to inform you that the power outage being experienced in our franchise states is due to system collapse of the national grid.
“The collapse occurred at about 18:47 pm this evening hence the loss of supply on all our outgoing feeders. Power supply shall be restored as soon as the national grid is powered back,” it said.
Also, Eko Disco stated that it regretted the inconvenience to its customers, asking them to bear with the company as the issues were being sorted out.
“Dear Esteemed Customers, we regret to inform you of the on going system collapse on the National grid. This has affected our entire network and impacted our ability to deliver optimum service.
“Please bear with us as we are working with our Transmission Company of Nigeria (TCN) partners on a swift resolution,” it stated.
Although there was no official communication from the TCN, it was learnt that the system was yet to pick up load as at 11 pm.
Power supply in the country has always been erratic in Nigeria, although it has gone worse in recent times, with hope waning as to whether the Muhammadu Buhari-led administration will be able to make any marked difference in the remaining months.
Follow us on:
