There are concerns that Nigerians may pay more for petrol as some members of the Organisation of Petroleum Exporting Countries (OPEC) continue to extend their voluntary crude oil production cuts into the month of August to shore up the international price of the commodity.
Crude oil rates remain a major determinant of petrol prices worldwide, taking up as much as 80 per cent of the price of the product. As at 8pm yesterday, the price of Brent, Nigeria’s oil benchmark was $76.72 while US oil, WTI crude was selling for $71.88.
OPEC’s de facto leader and the world’s biggest crude exporter, Saudi Arabia, is said to be dissatisfied with the current prices and has recently embarked on reducing its crude production, alongside Russia and Algeria.
While Saudi Arabia is cutting 1 million barrels per day into August, Russia and Algeria volunteered to lower their August output and export levels by 500,000 bpd and 20,000 bpd, respectively.
Nigeria which recently removed all its subsidy payment on petrol does not refine products locally as a result of dilapidated refineries and therefore has to depend fully on imports and subjecting the country to the volatility of market forces.
Some other factors that determine the prices of petrol aside the price of crude include refining cost, shipping cost, distribution and marketing cost as well as taxes and levies imposed by Nigeria.
The International Monetary Fund (IMF), recently said that Saudi Arabia would essentially need oil prices to sell at $80.90 per barrel to balance its budget this year.
The Nigerian National Petroleum Company Limited (NNPC) Group Chief Executive Officer, Mele Kyari, sometime ago said Nigeria was comfortable with $50 oil so as not to chase away the country’s customers and encourage them to embrace renewables.
Since there’s a direct relationship between the international price of crude oil and pump price in Nigeria, especially in a free market setting, a rise in the price of the commodity which had been selling around the low $70s before now, could lead to a rise in the pump price in Nigeria.
Meanwhile, OPEC Secretary General, Haitham Al-Ghais , said on Wednesday that the oil cartel will continue to work to ensure market stability as billions of people are dependent on oil for their daily lives.
Speaking at the ongoing 8th OPEC International Seminar in Vienna, attended by delegations from Nigeria, Al-Ghais said that despite all the debate about jettisoning fossil fuels, oil remains very important for the planet, and sustainability should be achieved.
“The concept of sustainability is essentially about balance. Sustainability relates to how we fulfil the needs of our current generations without compromising the needs of our future generations while ensuring the balance between three pillars of sustainability: economic viability, environmental protection and social equity,” he said.
But he reiterated that OPEC was not also against working towards reducing greenhouse gas emissions.
“Oil is too central and fundamental for life. We recognize this reality and constantly strive to reduce our environmental footprint and we can all move toward a sustainable and inclusive energy transition,” he stressed..
He added that the ongoing energy transition in the world should be inclusive in nature where the voices of everyone should be taken into consideration.
“Sustainability and inclusivity are terms that are repeated so often. Inclusivity relates to ensuring that all voices are heard in discussions of the energy transition, including developing and developed countries, producers and consumers,” Al-Ghais said.
While arguing that renewable energy sources were not sufficient to achieve the climate goals outlined in the Paris Agreement, the secretary general noted that: “There is no one-stop solution to achieve sustainability”, adding that multiple pathways should be embraced to reach the goals of the Paris Agreement.”
Nigeria recently pledged to meet the Paris Agreement, an international treaty on climate change that compels signatories to work toward limiting the global temperature increase to 1.5 degrees Celsius above pre-industrial levels, by 2060.
Also speaking at the event, Antonio Oburu Ondo, President of the OPEC Conference in 2023 and Equatorial Guinea’s Minister of Mines And Hydrocarbons, said that it will be difficult for the world to function without oil.
“The energy reality is that the world cannot do without oil. It has been central to our past, it is fundamental to our future, and it is pivotal to our present. It is a 24/7 commodity. We cannot do without it,” he argued.
OPEC has been attempting to keep oil production and price steady, pumping an average of 28.57 million barrels a day in June, a modest increase of 80,000 a day from May.
Despite initial predictions for a rally this year, oil prices have instead sagged about 12 per cent so far in 2023 amid a lacklustre post-pandemic recovery in China and fears that rising interest rates will trigger a global recession.
Emmanuel Addeh
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