Fuel subsidy is usually resorted to when the price of crude oil in the international market is higher than the consumers can afford. The government then pays the difference between what it's citizens can conveniently pay and the international price. That difference is usually called subsidy. The higher the international price, the more subsidy the government pays. Whereas if the price is lower, the less subsidy is paid.
Mathematically, if the cost of buying refined petroleum product in the international market is N150, and the government decides to reduce the burden on the masses by fixing the price of, say, petrol at N100, the subsidy on petroleum to the government is N50. Now if the price has falling, as we are currently experiencing, to N120, the government may decide to reduce the price of the product for the public or reduce its subsidy payment.
When government in 2011 increase the pump price of petrol to N97, crude oil was selling at between $102 and $115 per barrel. This the government translates to about N 141 per liter of petrol. The government decided to pay the difference of N44 (N141 - N97) as subsidy. Now if the price of crude at the international market has reduced to between $74 and $80 it therefore means the price per liter has also reduced.
This means either the subsidy paid by the government have been completely wiped out, or a massive reduction has occurred. Since we are passing through economic crunch by the reduction in price of crude oil, our main economic stay, the government may not reduce the pump price of petroleum product. Neither will it increase it.
So all the hues and cries by our arm chair critics about an increase in pump price of petrol because of a reduction in the fuel subsidy payment in 2015 budget estimate is neither here nor there. The government may even reduce the pump price of fuel, as Yaradua government did in 2008, when crude oil price crashed at the international market. The price was reduced from N70 to N65.
2015, being election year, I don't see Jonathan increasing the pump price of fuel. There may likely be a reduction.

The government has already said that petroleum subsidy will be cut by half next year so it is obvious that there will be an increase in the pump price of petroleum products.

desgiezd:
The government has already said that petroleum subsidy will be cut by half next year so it is obvious that there will be an increase in the pump price of petroleum products.

How does the government reduction in subsidy payment translates to an increase in pump price of oil when the price of crude at the international market is falling? Please educate me.

Basically, your write-up is the way things should be naturally but right now, the reduction in the amount of cash coming into the government's purse is the major issue here. They will reduce the already low amount presently being spent on subsidy in order for them to increase the money coming into their pockets. Let's not forget that the government has always been looking for the opportunity to reduce/remove this subsidy so this is a natural way for them to do what they had always wanted to do.

In other words, this fall in international price of Petroleum should reduce the amount being spent on subsidy but the government would not want us to reason as rational beings!

Elose11:
Fuel subsidy is usually resorted to when the price of crude oil in the international market is higher than the consumers can afford. The government then pays the difference between what it's citizens can conveniently pay and the international price. That difference is usually called subsidy. The higher the international price, the more subsidy the government pays. Whereas if the price is lower, the less subsidy is paid.
Mathematically, if the cost of buying refined petroleum product in the international market is N150, and the government decides to reduce the burden on the masses by fixing the price of, say, petrol at N100, the subsidy on petroleum to the government is N50. Now if the price has falling, as we are currently experiencing, to N120, the government may decide to reduce the price of the product for the public or reduce its subsidy payment.
When government in 2011 increase the pump price of petrol to N97, crude oil was selling at between $102 and $115 per barrel. This the government translates to about N 141 per liter of petrol. The government decided to pay the difference of N44 (N141 - N97) as subsidy. Now if the price of crude at the international market has reduced to between $74 and $80 it therefore means the price per liter has also reduced.
This means either the subsidy paid by the government have been completely wiped out, or a massive reduction has occurred. Since we are passing through economic crunch by the reduction in price of crude oil, our main economic stay, the government may not reduce the pump price of petroleum product. Neither will it increase it.
So all the hues and cries by our arm chair critics about an increase in pump price of petrol because of a reduction in the fuel subsidy payment in 2015 budget estimate is neither here nor there. The government may even reduce the pump price of fuel, as Yaradua government did in 2008, when crude oil price crashed at the international market. The price was reduced from N70 to N65.
2015, being election year, I don't see Jonathan increasing the pump price of fuel. There may likely be a reduction.

You have spoken like the way any reasonable Nigerian should talk, apart from if the person involved is clueless like GEJ...But mark my word and keep this for future reference, instead of reducing the pump price, it would surely be increased by the clueless one next year...just wait and see.

Nigerians should expect anything, and everything in the new year. The pictures are gloomy and i do not belong to the class of people who believe in prayers for solving problems like this. In short , and honestly, expect every thing in coming months. Do not be caught unprepared.

i pray that the fuel subsidy be removed next year

Your analysis is reasonable and that's how things should be in a normal society. But let's come back by March 2015 and re-analyse the situation then.

Elose11:
Fuel subsidy is usually resorted to when the price of crude oil in the international market is higher than the consumers can afford. The government then pays the difference between what it's citizens can conveniently pay and the international price. That difference is usually called subsidy. The higher the international price, the more subsidy the government pays. Whereas if the price is lower, the less subsidy is paid.
Mathematically, if the cost of buying refined petroleum product in the international market is N150, and the government decides to reduce the burden on the masses by fixing the price of, say, petrol at N100, the subsidy on petroleum to the government is N50. Now if the price has falling, as we are currently experiencing, to N120, the government may decide to reduce the price of the product for the public or reduce its subsidy payment.
When government in 2011 increase the pump price of petrol to N97, crude oil was selling at between $102 and $115 per barrel. This the government translates to about N 141 per liter of petrol. The government decided to pay the difference of N44 (N141 - N97) as subsidy. Now if the price of crude at the international market has reduced to between $74 and $80 it therefore means the price per liter has also reduced.
This means either the subsidy paid by the government have been completely wiped out, or a massive reduction has occurred. Since we are passing through economic crunch by the reduction in price of crude oil, our main economic stay, the government may not reduce the pump price of petroleum product. Neither will it increase it.
So all the hues and cries by our arm chair critics about an increase in pump price of petrol because of a reduction in the fuel subsidy payment in 2015 budget estimate is neither here nor there. The government may even reduce the pump price of fuel, as Yaradua government did in 2008, when crude oil price crashed at the international market. The price was reduced from N70 to N65.
2015, being election year, I don't see Jonathan increasing the pump price of fuel. There may likely be a reduction.

If the naira depreciates to 200 naira as is being speculated, there has to be an increase in oil prices if the subsidy bill is to be halved and if oil prices remain at $74. Next year will be a turbulent one. I expect the queues to return if government tries to halve the subsidy bill while maintaining current oil prices - the subsidy thieves are still in business and we are at their mercy.