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There Is No Refinery Without Government Interference - Politics - Nairaland

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There Is No Refinery Without Government Interference by paragonpro: 3:15pm On Jan 03, 2012
Contrary to what the government wants us to believe, there is no where in the world where the price of fuel is left to the vagaries of market forces. The us governments over the years had been actively involved with oil politics in order to regulate the price of fuel. So much so that the government spends billions of dollars if not trillions in wars to ensure they have access to cheap crude for its citizens. Russia is even worse, they arbitrarily determine the price of petrol and gas and sell to other European countries at what ever price they choose. They even inflate prices to countries that is not towing their line.

Refineries is not a profitable business, it is mainly used as a political tool, a form of tax tool or a social security tool, depending on the goals of the government. No private person will invest 200 billion dollars to build a medium sized refinery with the very long pay back time. they would rather invest in stock markets or government bonds.

The Nigeria government cannot and I repeat cannot shy away from directly being involved in refineries. They should earn their huge pay for a change.
Re: There Is No Refinery Without Government Interference by courage89(m): 3:35pm On Jan 03, 2012
Your analysis is flawed. While refinery is not the most profitable business venture, it is profitable. Thats why companies like Conoco Phillips, Marathon Oil Company would rather split their company and operate their refienries than to sell out to others. Thats why you have companies like Citgo, Valero and others that rely only on refinery business for their business existence.

In the US, the government does not operate refineries. All they do is to provide conducive regulatory environment for refinery businesses to thrive. I cannot for once remember the last time US have fuel scarcity, or when the price becomes too unbearable (because it follows the price of crude oil, which everybody follows). If government want to continue to kill and haemorrage that industry of funds, innovation, proper management, growth and other benefits, they should continue to micro manage it. The only way to get the refinery industry in Nigeria moving is by way of government hands off, I repeat, government does not have any business being in that business at all. Their business should revolve around taxation and regulation.


paragonpro:

Contrary to what the government wants us to believe, there is no where in the world where the price of fuel is left to the vagaries of market forces. The us governments over the years had been actively involved with oil politics in order to regulate the price of fuel. So much so that the government spends billions of dollars if not trillions in wars to ensure they have access to cheap crude for its citizens. Russia is even worse, they arbitrarily determine the price of petrol and gas and sell to other European countries at what ever price they choose. They even inflate prices to countries that is not towing their line.

Refineries is not a profitable business, it is mainly used as a political tool, a form of tax tool or a social security tool, depending on the goals of the government. No private person will invest 200 billion dollars to build a medium sized refinery with the very long pay back time. they would rather invest in stock markets or government bonds.
The Nigeria government cannot and I repeat cannot shy away from directly being involved in refineries. They should earn their huge pay for a change.
Re: There Is No Refinery Without Government Interference by paragonpro: 4:36pm On Jan 03, 2012
Courage99
On the profitable of the refinery business we are in agreement that it it's profitability is long term - and that is in the western nations where you have favourable business climate. In Nigeria, with interest rate running at around 20%, 5% VAT, taxes from local, state and federal agencies, highly corrupt regulators and an alphabet soup of regulatory agencies, labour and union issues, community relations, and most importantly a volatile international price of crude, a private refinery would not be profitable.

The us examples you quoted do not exactly reveal the truth, the us gets crude from multiple sources, from their crude reserves, from OPEC like nigeria at international prices and a lot of under hand dealings with friendly gulf countries like Saudi Arabia and Kuwait (remembers it was the selling of cheap oil to the US that angered Saddam to invade Kuwait). So the US government ensures its private refineries obtain cheap crude.

Finally is it the private refineries that ensures the US has enough crude reserves to last over 20 years? No it is the government. So the private refineries are sure of supplies for the next 20 years, but in Nigeria if there is a major catastrophe like a world war, crude supplies shut down immediately. NNPC cannot even store crude reserve for one year because of corruption, the same corruption that cannot allow government to operate refineries.

I am sure that even the so called private refineries if they are set up at all would be set up by national oil corporations of other countries and not necessarily private individuals or corporations.

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