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Nairaland Forum / Nairaland / General / Politics / Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) (7960 Views)
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Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by impetus: 5:23pm On Apr 23, 2015 
There has been an ongoing national argument on the reality of the oil subsidy which some eminent Nigerians have refuted against. Former petroleum minister Prof Tam David West breaks down his analysis of the falsehood behind the fuel subsidy that has only enriched a few rich and selfish individuals in Nigeria. See insightful details. 1) One barrel of Crude oil = 42 gallons or 159 litres 2) Our Refineries (i.e 4) Installed (combined) capacity = 445,000 barrels per day 3) Actual refineries capacity due to ageing equipment = 30% i.e. 133,500 barrels per day. 4) 133,500 barrels = 21.2 million litres 5) Local required consumption (F.O.S) = 12millions litres 6) It means that even our MORIBOND refineries can actually meet our local consumption need of petroleum. 7) The cost structure of crude oil (i.e. Qua Iboe Crude Oil) production; – Findings / development – $3.5 – Production cost – $1.5 – Refining Cost – $12.6 – Pipeline/transportation – $1.5 – Distr/bridging fund Margin $15.69 True cost of one litre of petroleum anywhere in Nigeria; – Total sum cost = $34.8 – 1ltr cost = $34.8/159 litres = $0.219 – Naira equiv. 0.219xN160= N35.02k – Add Tax N5 + N35.02 = N40.02 9) Let FGN refute the above composition and if not, they should tell us how they came about N95/N85 litre. 10) Locally refined products cannot be sold at International price. 11) We really do not need FGN SUBSIDY as there was NONE in the first place. 12) What is LACKING, is the WILL to enforce LAW ON CORRUPTION. Pls repost until it gets to the right quarters for their response; We still stand a chance as a COUNTRY. Analysis by Professor Tam David West, former Petroleum Minister. http://nigeriana.org/135485.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Jetheights+%28Jobemy+Nigeria%29 16 Likes 7 Shares 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by imbless: 5:25pm On Apr 23, 2015 
This man should go and seat down 2 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by Nobody: 5:27pm On Apr 23, 2015 
temitemi1:at last 10 Likes 1 Share 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by ELTON123(m): 5:44pm On Apr 23, 2015 
Incase of ,,,,,, 1 Like 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by taharqa: 5:50pm On Apr 23, 2015 
Lolz Prof, in deed 1 Like 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by obi4eze: 5:51pm On Apr 23, 2015 
I don't know much about the cost of refining crude but if he is wrong let Deziani and other experts refute his analysis. 15 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by bakynes(m): 5:53pm On Apr 23, 2015 
imbless:Are you okay? I don't think so 15 Likes 2 Shares 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by JustCalMeDBoss(m): 5:59pm On Apr 23, 2015 
A simple knowledge of fractional distillation shows that only 42% of gasoline can be gotten from a barrel of oil. For our type of oil. now the US energy information assessment agency clearly states that 19 gallons of gasoline and 12 gallons of diesel can be gotten from a barrel of oil. Bloomberg also states nigeria can only meet 16 percent refining capacities of its domestic needs which a large percentage is lost to vandalism and depends on importation for over 70% of its domestic needs. Every body wants to be an economist now. LOL Buhari the miracle worker. But let him start with Oando because we know tinubu has a large share there. http://www.bloomberg.com/news/articles/20141223/oilsslumpgivesnigeriachancetoend7billionfuelsubsidy http://www.eia.gov/tools/faqs/faq.cfm?id=327&t=9 http://www.petroleum.co.uk/refining 8 Likes 1 Share 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by adino(m): 6:34pm On Apr 23, 2015 
It is simple the CLUEFOOL one ( olodo general) should appoint Tam David West as new petroleum minister and petrol automatically turns N40 per litter. CASE CLOSED. 1 Like 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by ojoyentalk: 6:48pm On Apr 23, 2015 
Petroleum consumption function. 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by dgr8truth(m): 6:49pm On Apr 23, 2015 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by HzRF(m): 6:50pm On Apr 23, 2015 
JustCalMeDBoss:They have fools who will believe dem Create a thread on this pls 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by Nobody: 7:20pm On Apr 23, 2015 
Jonathan has been scamming Nigerians since 2010. How long would it cost to build a detention centre for male and female..maybe 68weeks. Can we identify a location? Maybe Zamfara state (Sharia State). I support we build this facility there immediately from June 2015. Just imagine the fraud..I agree with this analysis even we apply an error level of 10% the difference would still be humongous. Anyone who does not agree with this should put on his gloves and bounce out...... 4 Likes 1 Share

Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by Elcapo(m): 8:14pm On Apr 23, 2015 
Mathematically Ever had about a priori in economics? 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by VolvoS60(m): 8:37pm On Apr 23, 2015 
JustCalMeDBoss: ^^^^ The issue I have with your analysis above is your silence on costs. Any analysis of petroleum products 'subsidy' is incomplete until the cost of local production (and refining) of a litre of petrol is clearly stated. For several months I have repeatedly asked here for the true cost of producing and refining a litre of PMS locally (in Nigeria). Most of those who claim to support 'subsidy' removal have shied away from this challenge. We all agree there is a subsidy on imported PMS sold in Nigerian petrol stations. What has never been fully made clear is whether or not there is a subsidy on locally produced and refined PMS. If there is, how much is it? The supporters of fuel 'subsidy' removal avoid answering the question because of the fresh questions that will be raised: if indeed there is no subsidy on locally produced PMS then why have new refineries not been built by the government? Why should Nigeria import refined petroleum products in the first place? On a slightly related note  the Bloomberg article you cited has a quote attributed to Mrs Okonjo  Iweala  she is quoted as saying that a US$60 per barrel price represents a 'break even'point at which there is no longer a subsidy. Hasn't that price limit been crossed? 12 Likes 3 Shares 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by oladele97: 8:42pm On Apr 23, 2015 
If this is true, am proud to be part of Buhari volunteer 3 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by VolvoS60(m): 9:12pm On Apr 23, 2015 
The heart of this petroleum subsidy matter is item number 10 in the OP's list  the local sale of refined petroleum products at international prices. This policy was allegedly put in place by the OBJ administration. Is this claim true or false? And what are the merits/demerits of this move? 1 Like 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by grandstar(m): 9:34pm On Apr 23, 2015 
Listen up guys and listen good! Tam David West is an economic illiterate When a company wants to carry out machinery valuation, who do they callAn estate valuer or an engineer? Interestingly, they do not call an engineer. Its an estate valuer they call. You may wonder why? Because value of a product is determined by the Law of demand and supply or simply put, market forces. If you have ever bought a sachet of pure water for 50naira in a monstrous traffic jam, you'll know what I mean. Or alternatively, have you ever tried to dispose of your own item and found out that what you are being offered is usually less than your ideal value? Tam David West here is speaking about cost of production and not value. Based on cost of production, yes there is no subsidy. But based on market value, there is. No company in its right mind will invest hundreds of millions of dollars or even billions into producing oil if the sale price is based on the cost of production. Not a penny will be invested. No bank will ever extend money to such a venture! Do you know that the market value can at times be less than the cost of production? It has happened several times. Why do you think that Saudi Arabia refuses to reduce the quantity of oil it produces. It wants there to be a glut so as to drive down price of crude oil to make it unprofitable for the Americans oil producers operating in the United States who have a very high cost of production. If the market price is $80 and the FG is compelled to sell at say a cost of production price of $30 in order for the price to be 87naira, that means the government subsidizes it by $50 a barrel. If you are a restaurant and the price for a plate of rice with chicken is N300 and you are compelled to sell at N150 which is your cost price, you are subsidising it by N150. If you sell 100 plates at 150, you are losing 150. impetus: 2 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by Igwe9(m): 10:53pm On Apr 23, 2015 
No problem, only time will tell, it is even sooner than we think. I pray they give this man petroleum minister. 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by wordcat(m): 11:25pm On Apr 23, 2015 
imbless: Number 9 reads; Let FGN refute the above composition and if not, they should tell us how they come about N95/N85 litre. Are you ready to refute the fact? 2 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by dasensible1(m): 11:45pm On Apr 23, 2015 
Even if I do not fully agree with this west of a man, my questions are 1. Do our local refineries produce fuel at all? 2. If yes, what is the quantity been produced daily/weekly? etc 3. Where do the locally refined fuel go to? 4. Do we pay the same amount for fuel produced locally and the imported fuel? Just asking because we need to fully understand where we are right now so as to know where change is needed. 2 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by omoalaro: 11:46pm On Apr 23, 2015 
If this is true, Nigerians can expect immediate relief from the new government by way of cheaper fuel prices. 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by TheGoodJoe(m): 12:05am On Apr 24, 2015 
grandstar: When you start by calling a Former Petroleum minister and economic illiterate, you are bound to miss a point. First of all, during Subsidy, no marketer is forced to sell below his planned price. The government pays him money to balance his profit target and sell it at a reduced price. For instance, if he plans to sell at #150, the government pays him #60 so that he can sell it at #90 and regain his profit. Secondly, we are talking of Subsidy on locally refined products. So your analogy of an investor does not hold because the Federal Government's owned body, NNPC refines the product, 2 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by bright007(f): 12:05am On Apr 24, 2015 
shoro niyen? 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by jahbiz: 12:06am On Apr 24, 2015 
W all know fuel subsidy is a scam, a real scam by our leaders. 3 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by Volksfuhrer(m): 12:15am On Apr 24, 2015 
It is scandalous that we are importing PMS! The subsidy scam wouldn't have flourished if we had local refineries working at optimum capacity. You now see why the local refineries need to stop working for the subsidy scam to fester! 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by modskiller(m): 12:30am On Apr 24, 2015 
Make I buy this plot, C of O loading

Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by mobaking: 12:41am On Apr 24, 2015 
I wonder how some people reason.After 16years,no refinery working ,and u say we had a govt?.Should Nigeria be talking of importing petroleum products now?.I just want Buhari to appoint people that know that sector inside out to manage it and unbundle those four towers of corruption called NNPC.How many of our contemporaries in OPEC is importing refined products like Nigeria? SMH! 2 Likes 1 Share 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by baybeeboi: 1:08am On Apr 24, 2015 
everybody in Nigeria now a mathematician. It's alright......we are goin there. #Patiently watching 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by otr1(m): 1:09am On Apr 24, 2015 
JustCalMeDBoss:In your mind now, you're making sense, ain't it? Ok let's assume we import all the PMS we consume and the landing cost is N160/litre. Let's put consumption at 15,000,000 litres daily. At N40/litre pump price ( N120/litre paid as subsidy), the subsidy payable in a leap year is N658,800,000,000( N658.8 billion). Can you now justify the N971 billion spent last year on subsidy even when we are still buying PMS at N97/litre? After 16 years of PDP misrule, our refinery are still operation at 16% of installed capacity and it's ok? GEJ have been there since 2010, what stops him from working on these refineries to at least, work at just 40% capacity even if 19 gallons is what we'll get in a barrel? Don't even talk about vandalism, because militants are being paid to secure the pipelines. You have no clue. SMH 5 Likes 2 Shares 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by otr1(m): 1:26am On Apr 24, 2015 
grandstar:Just read the rubbish you posted all over again. Does it even make sense to you? You need some hot slaps to restore your senses for calling DW an Economics illiterate 4 Likes 
Re: Fuel Subsidy Is A Lie – Prof David West (MATHEMATICAL ANALYSIS) by otr1(m): 1:52am On Apr 24, 2015 
Elcapo:We're not testing an hypothesis here my friend. He wasn't assuming anything. He was just stating the facts. Of what use is "a priori" when proving that Bachelors are not married? 1 Like 
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