I'm raising this topic in light of the announced reduction in petrol pump price by the Federal Government. We were made to understand that the price of diesel is around N150-N170 per litre is due to the fact that subsidy was removed completely during the Obasanjo era. Now what this should mean, in practice, is that the final pump price would vary with the price of crude oil. We have consistently had high diesel prices due to the high prices of crude oil.

So the important question is this: Since crude oil prices have been falling since around October 2014 (from a high of $115/bbl to around $47/bbl now) and the diesel market is fully deregulated, why has the retail price of diesel not fallen in line with the falling crude prices? Aren't the prices of products determined (in part, at least) by the cost of the key raw materials utilized in the production of such products?

We need answers.

Another interesting point to note is that the PPPRA is yet to update their pricing template since December 29th. See template here http://www.pppra.gov.ng/ago.html meanwhile the price of crude oil has fallen from around $57/bbl at that date to around $47 now.

Why has the decline in crude oil prices not reflected in the final retail price of diesel?

How about price of kerosene?

When will price of cooking gas and kerosene fall?

HNosegbe:
I'm raising this topic in light of the announced reduction in petrol pump price by the Federal Government. We were made to understand that the price of diesel is around N150-N170 per litre is due to the fact that subsidy was removed completely during the Obasanjo era. Now what this should mean, in practice, is that the final pump price would vary with the price of crude oil. We have consistently had high diesel prices due to the high prices of crude oil.

So the important question is this: Since crude oil prices have been falling since around October 2014 (from a high of $115/bbl to around $47/bbl now) and the diesel market is fully deregulated, why has the retail price of diesel not fallen in line with the falling crude prices? Aren't the prices of products determined (in part, at least) by the cost of the key raw materials utilized in the production of such products?

We need answers.

During the 2012 subsidy protest, some GEJ supporters argued that if PMS was fully deregulated, then competition would force the price down. I told them to look at the diesel and kerosine market.

adconline:
How about price of kerosene?

berem:
When will price of cooking gas and kerosene fall?

They say there's still a subsidy on kerosene - so fall in crude prices may reduce the subsidy payments first before it affects the retail price. But that excuse can't hold water for diesel because the government says that the price of diesel is fully deregulated. So the question is: Why should diesel remain at N150 when the price of crude oil has fallen by over $50/bbl in the last three months or so?

AZeD1:

During the 2012 subsidy protest, some GEJ supporters argued that if PMS was fully deregulated, then competition would force the price down. I told them to look at the diesel and kerosine market.

Exactly. The diesel market should show us the effects of a fully deregulated market. With the fall in crude oil prices the diesel price should go down too. This should be the case in a fully deregulated market unless it dominated by a carter as Demdem asserts. This raises another question: if the government can't show us the fruits of deregulation of diesel, on what basis can the government justify full deregulation of petrol?

More questions than answers.

HNosegbe:


Exactly. The diesel market should show us the effects of a fully deregulated market. With the fall in crude oil prices the diesel price should go down too. This should be the case in a fully deregulated market unless it dominated by a carter as Demdem asserts. This raises another question: if the government can't show us the fruits of deregulation of diesel, on what basis can the government justify full deregulation of petrol?

More questions than answers.

In theory, deregulation should for the price down, but in Nigeria, due to a lack of strong institutions, anything goes. Its the reason why i don't have faith in the privatization programs of the government.

AZeD1:

In theory, deregulation should for the price down, but in Nigeria, due to a lack of strong institutions, anything goes. Its the reason why i don't have faith in the privatization programs of the government.

Agreed. However my call is for transparency on the part of the government. The Petroleum minister and the PPPRA need to tell us why the fall in crude prices have not reflected in diesel prices if they claim they have deregulated diesel. Or else one may be forced to align with Demdem's point of view.

Interesting that no apologist of the current administration has volunteered a response.

HNosegbe:


Agreed. However my call is for transparency on the part of the government. The Petroleum minister and the PPPRA need to tell us why the fall in crude prices have not reflected in diesel prices if they claim they have deregulated diesel. Or else one may be forced to align with Demdem's point of view.

[b]
Believe u me, there is a diesel cartel out there sucking Nigerians dry. If a sector is fully deregulated where players come in and compete, we will know. Telecoms sector is a perfect example. These guys came in and we saw stiff competition between the players all for the good of the consumer. That is the end result of a deregulated sector.
Another sector where cartels are sucking us dry is also the cement sector. These guys Av taken Nigerians as fools. These goons met over lunch and just decided to reduce cement price. Was that the way Econet, mtn and glo met to discuss how to crash telecom prices?
There is no competition at all in both cement and diesel.
Don't be surprised that Chief Ayeni who singlehandedly gave Jonathan campaign 2 billion naira has significant interest in this sectors. These are the kind of people determining how much Nigerians will buy diesel even if crude falls to 10 dollar per barrel.
They will tell Jonathan that they purchase their diesel from space and the drunkard will foolishly accept their bunkum.[/b]

HNosegbe:


Agreed. However my call is for transparency on the part of the government. The Petroleum minister and the PPPRA need to tell us why the fall in crude prices have not reflected in diesel prices if they claim they have deregulated diesel. Or else one may be forced to align with Demdem's point of view.

Demdem is right.

Profiteers and nothing else.

Demdem:

[b]
Believe u me, there is a diesel cartel out there sucking Nigerians dry. If a sector is fully deregulated where players come in and compete, we will know. Telecoms sector is a perfect example. These guys came in and we saw stiff competition between the players all for the good of the consumer. That is the end result of a deregulated sector.
Another sector where cartels are sucking us dry is also the cement sector. These guys Av taken Nigerians as fools. These goons met over lunch and just decided to reduce cement price. Was that the way Econet, mtn and glo met to discuss how to crash telecom prices?
There is no competition at all in both cement and diesel.
Don't be surprised that Chief Ayeni who singlehandedly gave Jonathan campaign 2 billion naira has significant interest in this sectors. These are the kind of people determining how much Nigerians will buy diesel even if crude falls to 10 dollar per barrel.
They will tell Jonathan that they purchase their diesel from space and the drunkard will foolishly accept their bunkum.[/b]

Interesting points. Since government has failed (or refused) to furnish us with requisite information one may be inclined to go with this point of view. More reason why the government at the centre can't be trusted.

J12:
Profiteers and nothing else.

And such "profiteers" are allowed to fleece the country without consequence?

HNosegbe:


And such "profiteers" are allowed to fleece the country without consequence?

Its a free market. If you can supply at a cheaper price, whats stopping you?

Besides, Nigerians aren't the only ones paying exorbitant prices for diesel. Diesel sells for (1.14 pounds) over 200 naira per liter in the UK.

J12:


Its a free market. If you can supply at a cheaper price, whats stopping you?

Besides, Nigerians aren't the only ones paying exorbitant prices for diesel. Diesel sells for (1.14 pounds) over 200 naira per liter in the UK.

So you are supportive of a market where a cartel can determine prices with impunity? Meanwhile following from this, what is the basis for government telling us that competition in the petrol sector will bring prices down if we can't see such results in the diesel market? Why should we take them serious?

Meanwhile before you compare Nigeria with UK, consider this:

UK per capita income = $41,787

Nigeria per capita income = $3,006

Source

HNosegbe:


So you are supportive of a market where a cartel can determine prices with impunity? Meanwhile following from this, what is the basis for government telling us that competition in the petrol sector will bring prices down if we can't see such results in the diesel market? Why should we take them serious?

Meanwhile before you compare Nigeria with UK, consider this:

UK per capita income = $41,787

Nigeria per capita income = $3,006

Source

My point is that what Nigerians are paying for diesel is equivalent or similar to what citizens of other countries pay for diesel. The profiteering is actually not as much as we think it is and you should also remember that the NNPC sells diesel for a similar price.

J12:


My point is that what Nigerians are paying for diesel is equivalent or similar to what citizens of other countries pay for diesel. The profiteering is actually not as much as we think it is and you should also remember that the NNPC sells diesel for a similar price.

When you say "the profiteering is actually not as much as we think it is" are you saying that 1) The cartel should be allowed to continue to rip Nigerians off and 2) The government (including the NNPC) is actually in cahoots with them, since they have refused to disclose the pricing template used to arrive at the market price?

Meanwhile why should we then have confidence in the government's drive for deregulation of the petrol market if that of diesel has been handled so shabbily? Will deregulating the petrol market not also lead to a cartel, as Demdem avers? Why should we let that happen?

Still no answers from GEJ supporters?

HNosegbe:


When you say "the profiteering is actually not as much as we think it is" are you saying that 1) The cartel should be allowed to continue to rip Nigerians off and 2) The government (including the NNPC) is actually in cahoots with them, since they have refused to disclose the pricing template used to arrive at the market price?

Meanwhile why should we then have confidence in the government's drive for deregulation of the petrol market if that of diesel has been handled so shabbily? Will deregulating the petrol market not also lead to a cartel, as Demdem avers? Why should we let that happen?

Perhaps I used the wrong words and terms. Let me rephrase and make myself clear.

1. Diesel is an industrial product, which is not used by over 90 percent of Nigerians
2. The price of diesel is not regulated by the government
3. The prices of diesel are fair and competitive even when compared with global pricing models
4. I am unsure and unaware of any profiteering or price manipulations by powerful cartels in the sector.
5. Cartels exist everywhere in the world, in the most advanced countries.
6. The Nigerian government has not handled the deregulation of diesel shabbily as you have claimed.

J12:


Perhaps I used the wrong words and terms. Let me rephrase and make myself clear.

Ok... listening.

1. Diesel is an industrial product, which is not used by over 90 percent of Nigerians

If the point you're trying to make here is that diesel prices don't affect Nigerians then you're wrong. This is because the industries that use diesel factor in the cost of diesel into their cost of production and pass it on to final consumers i.e. you and me.

2. The price of diesel is not regulated by the government

So we're told - which should imply that the retail price be subject to market forces as well as cost of production.

3. The prices of diesel are fair and competitive even when compared with global pricing models

How can this be ascertained when we can see prices fluctuate in advanced countries due to market forces and yet remain constant in Nigeria?

4. I am unsure and unaware of any profiteering or price manipulations by powerful cartels in the sector.

But earlier in the thread this was what you said:

J12: Profiteers and nothing else.

So which one is it?

5. Cartels exist everywhere in the world, in the most advanced countries.

But we can see other countries taking steps to rein in cartels and curtail their activities (US China, India and Japan to mention but four examples). What is our government doing?

http://en.wikipedia.org/wiki/Competition_law

6. The Nigerian government has not handled the deregulation of diesel shabbily as you have claimed.

Difficult to believe, given the questions raised in this thread.

HNosegbe:
Still no answers from GEJ supporters?

It will soon come.

Oya

HNosegbe:
Still no answers from GEJ supporters?

The filling stations are clearly flouting the government's directive to sell petrol at N87.
I guess that is GEJ's fault too.

buggaboo:


The filling stations are clearly flouting the government's directive to sell petrol at N87.
I guess that is GEJ's fault too.

Who is talking about petrol?

Please read and digest a topic before you type.

HNosegbe:


Who is talking about petrol?

Please read and digest a topic before you type.

It's similar to the deisel situation isn't it.
The gov has created an open market for deisel but you are still heaping the blame for the high cost of deisel on them.
Why not blame the greedy Nigerians who are involved in price fixing.

HNosegbe:
Another interesting point to note is that the PPPRA is yet to update their pricing template since December 29th. See template here http://www.pppra.gov.ng/ago.html meanwhile the price of crude oil has fallen from around $57/bbl at that date to around $47 now.

Why has the decline in crude oil prices not reflected in the final retail price of diesel?

Diesel has been fully deregulated. So, govt no get hand for there again.

Sunnybobo3:


Diesel has been fully deregulated. So, govt no get hand for there again.

I think the question is why has the price remain the same despite the fall in crude oil prices globally? If its been sold at N165/l when the price of crude oil was $105, why has it not fallen to atleast N90 now when the crude oil price is $50


This post deserve FP

buggaboo:


The filling stations are clearly flouting the government's directive to sell petrol at N87.
I guess that is GEJ's fault too.

What is the function of PPPRA?

Good question. I think the drastic fall in the value of the naira is a factor. Let's allow unbiased industry insiders to answer the question. Besides, in some places the rice of diesel has fallen to 137/l.