₦airaland Forum

Please I am not understanding this stuff at all
Fuel price increased immediately oil rose to $118/ barrel from about 850- 1350, and now that oil is back to $74/ barrel , why is fuel still being sold at 1350??


I thought it’s forex that runs this oil economy

We are still selling old stock

Op are you a learner? Go and build your own refinery and sell at 800 says dem zombies

We're so funny in this country. When prices of crude go up, we would not sell the old stock at old prices but the moment it comes down, we suddenly remember the need to sell off the old stock!

As of today, petrol is supposed to be selling for N770.00

You guys are yet to grasp the concept of an inflated economy like Nigeria,
In a non-inflated economy, when prices rise due to events, the structure of the economy will bring it back to its place post-event.
For an inflated economy, even without events, prices want to go up; they want to explode.
The event just gives it the excuse. But the real place of the price is up there.

The rule is that, when a price goes up, it cannot come down.

Any price which goes up hardly comes down in Nigeria.

Watch how they'll avoid this thread

Well, the old fuel stocks have to be sold off first, or else the marketers and refiners lose money.

In brief, when the fuel that is being sold now was being refined, the price was higher than it is now. So the prices of fuel won't come down until that old stock is sold off.

When the fuel that is being sold at the new prices ie the lower price, is refined and reaches the market, that's when the price most likely would come down.

It may happen in the next few weeks, since most of our fuel is being produced domestically, but again depends.

Keep in mind that if fuel prices fall TODAY...it means losses, which affects salaries and wages of workers in the petroleum sector. Ordinary Nigerians.

MODIFIED

This guy explains it better than I can ever do

Teymanhenry:
Imagine a filling station bought 100,000 litres of petrol when the landing cost was high, say ₦1,300 per litre. After adding transportation, staff costs, and profit, they start selling at ₦1,340 per litre.
A week later, crude oil prices fall and new petrol shipments become cheaper. Does that mean the station should immediately reduce its price to ₦1,200 per litre?
No. The petrol in their tanks was bought at the old, higher price. If they suddenly reduce the pump price, they could end up selling below their cost and losing money on the stock they already paid for.
So they usually continue selling the existing stock at the old price. Only after that stock is exhausted and they purchase new, cheaper supplies can they begin to reduce prices.
It's similar to a shop owner who bought bags of rice for ₦100,000 each. If the market price drops to ₦90,000 the next day, he can't immediately sell his existing stock as if he bought it at ₦90,000. He first needs to recover the money he spent on the old stock before passing on the lower prices from new purchases.
That's why a drop in crude oil prices today does not automatically translate into cheaper petrol at filling stations tomorrow. The cheaper crude must first work its way through refining, importation or production, distribution, and finally the sale of new stock to marketers before consumers see lower pump prices.

And we have a task force that is supposed to regulate fuel station pump activities?

This country lacks leadership on all fronts.

Julibet:
Watch how they'll avoid this thread

people wey suffering don wound them

Bandits still con dey add Pepper to body. Their obas are taking refuge in the lagoon

That is why I say we don't have government. When it was high our stupid government were saying that it's the war that cause it but now the war is over and crude has dropped down, Dangote is not using same energy and quickness to bring the products down. Now they are taking time because their excuse will be we bought it at that price. What about the price that they did not buy it and sold almost doubled the price.

The will tell you they are selling old stock but when it goes high the price reflects immediately.

That's why I say na we dey do ourselves. Not everything is government and in fact we're the government.
Once price goes up, we use old stock to make profit but when prices drops, it becomes difficult to sell at loss.
We all do it, so let's calm down until we finish our old stock. Thanks.

You won't hear anything from those A' rated pigs. They are all partners in crime

Even cooking gas too. I bought for 1680 just yesterday.

Oga stop forming holy.
This is the behavior of 99% Nigerians.
Greediness!!!!

We are masters of exploitation

nairalanda1:
Well, the old fuel stocks have to be sold off first, or else the marketers and refiners lose money.

Writing

Lose which money? Do you know how much they have gained by ripping people off within these months?

That's the consequences of criminal state capture....

This government is the worst ever in the history of this country. So far Tinubu is getting his cut, every other thing is meaningless to him. The man lacks emphaty and doesn't care about the welfare of the masses.

Thats the spot price,most oil rates are negotiated on futures contract......prices will definitely come down at the pumps but might take upto 2 to 3 weeks to fo back to pre conflict levels.

Checkwell:
Lose which money? Do you know how much they have gained by ripping people off within these months?

I'm posting an article now that explains it better.

There Is Always a Lag

The first-order effect of a spike in the price of oil and what we pay at the pump is a logistical one. The process of oil being acquired, refined, transported, and distributed to local retailers takes time, and it starts with oil that was purchased at oftentimes a different cost than the WTI futures price that everyone sees in the news.(for Nigeria, OPEC prices..ed).

The underground tanks at local retailers are refilled every few days or possibly throughout the day depending on how busy the location is. Each truckload of fuel is acquired at a price that depends on area wholesale prices which are set at more than 400 distribution centers. The retailer then sells fuel with these wholesale price dynamics and other factors in mind (more on that later). In the end, while consumers may see WTI/opec/brent/bonny prices fell by a large amount one day and expect that to be reflected at the pump immediately, the logistics of gasoline markets make this virtually impossible at most retail locations.

Service Stations Make Less Money as Prices Surge

Selling gasoline is a low-margin stream of income for service stations and convenience stores. Most businesses make more money selling snacks, food, and drinks than they do on fuel sales. According to the National Association of Convenience Stores, a retailer will, on average, price a gallon of gasoline at a $0.30 markup from local wholesale prices. That margin goes toward their rent, fuel delivery charges, credit card fees, and other operating expenses. In the end, a $0.10 per-gallon profit is what most store owners are looking at on average over the course of a year.

Obviously, operating costs, namely rent, can vary tremendously depending on location, which is a major reason you see such a discrepancy in pricing across different neighborhoods of the same urban area. And delivery costs, with a national shortage of commercial truck drivers and rising diesel prices, have surged even more than gasoline since the start of the year and make pump prices higher at locations farther from distribution centers. With it being so difficult to turn a profit in this industry, most integrated oil companies have exited the sector over the past 30 years, with less than 1% of retail locations now owned by companies that also produce oil.

It’s also important to note service stations price their gasoline for its “replacement cost”—what they anticipate it will cost to bring in the next delivery of fuel. In an environment of rising prices, sometimes this can cause retailers to hike prices at the first sign of higher oil prices. But more often than not, in highly competitive neighborhoods retailers tend to stall their price hike for fear of losing customers to other stores during the run-up.

SAUCE

It was written for an American audience, but it applies to Nigeria too.

Also, this is from PETROAN

When asked why price increases are felt immediately while decreases take longer, Herry pointed to the realities of supply management.

“It is mainly affected by whether the producer has additional resources or not at the time. Increases in prices are mainly caused by the need to restock. There must be that advantage pushing the price upward to be able to pay for new supplies,” he explained.

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On whether existing stock must be exhausted before prices can drop, the PETROAN president acknowledged that this is generally the case.

“That’s the basic idea. But in petroleum, a mixture is involved, and loss is taken, though not in a way that affects the capital needed to restock,” he noted.

Adding to the discussion, an energy analyst, Olabode Sowunmi, highlighted the broader complexities behind Nigeria’s fuel pricing.

He stressed that while the global price of crude oil is often seen as a major determinant, its influence is not always direct in the Nigerian context.

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“Global price of crude oil is a factor but a factor internationally and not necessarily in Nigeria,” he stated.

Sowunmi pointed to the example of Dangote Refinery, which, as a primary supplier of gas and some retail products, has agreements to allocate a percentage of his crude for Nigeria at a fixed price pegged in naira.

This arrangement, he noted, means that local pricing is not always tied to international fluctuations.

“So basically the issue will have to be from the point of refinery to where it touches the final person,” he said.

Sowunmi further clarified that international prices would only play a dominant role if global markets had a predominant impact on Nigeria’s supply chain.

“So basically our cost issues in terms of reflecting to the final person deal with our own logistics rather than the geopolitics that is taking place at the moment,” he stated.

When asked why internal logistics seem to matter more during price increases than decreases, Sowunmi acknowledged that the reasons vary but ultimately depend on the seller.

“There could be various reasons, but it all comes down to the seller,” he said, underscoring the role of market behavior in shaping consumer experiences.

Despite these challenges, Herry emphasised the broader mission of the sector.

“Petroleum is concerned with making Nigeria better,” he added.

Sauce: CHANNELS.

When someone said Nigeria is a crime scene, didn't you understand what he meant?

Krak:
Even cooking gas too. I bought for 1680 just yesterday.

That's still cheap, I will continue selling mine at 1900 until I finish the old stock except my competitors adjusted sooner.

nairalanda1:
Well, the old fuel stocks have to be sold off first, or else the marketers and refiners lose money.

In brief, when the fuel that is being sold now was being refined, the price was higher than it is now. So the prices of fuel won't come down until that old stock is sold off.

When the fuel that is being sold at the new prices ie the lower price, is refined and reaches the market, that's when the price most likely would come down.

It may happen in the next few weeks, since most of our fuel is being produced domestically, but again depends.

Keep in mind that if fuel prices fall TODAY...it means losses, which affects salaries and wages of workers in the petroleum sector. Ordinary Nigerians.

But when the price rises, they immediately implement it. Do they wait to sell off the old stock at cheap prices before raising the prices?

Your country is a crime scene.

Nigerian economy defies the normal textbook theory of demand and supply bullshit crap.

The only explanation is greed and corruption

Nigerian pricing system defies GRAVITY. Once it goes up, it can never come down

Lithiumite:
Thats the spot price,most oil rates are negotiated on futures contract......prices will definitely come down at the pumps but might take upto 2 to 3 weeks to fo back to pre conflict levels.

Did it take 2 or 3 weeks to go up during the conflict

Fekumzi123:
That's still cheap, I will continue selling mine at 1900 until I finish the old stock except my competitors adjusted sooner.

Do you even have a gas cylinder not to mention gas plant
Zone bee feeling funky

ZUBY77:
But when the price rises, they immediately implement it. Do they wait to sell off the old stock at cheap prices before raising the prices?

Your country is a crime scene.

If they reduced prices while they had old stock, they would lose a lot of money. It may make us happy, but their workers and shareholders won't be so happy. Again, most of them are ordinary nigerians, most of whom have to support families and workers.

It's because we had subsidy for over 5 decades that we were 'protected' from these realites of doing business.

Nothing to do with a crime scence. It's called the reality of doing business. You can change it by running a party that nationalizes the whole industry and sells fuel at people's prices, but experience has taught most it always ends with heavy debt for the nation eventually.

Zico5:
This government is the worst ever in the history of this country. So far Tinubu is getting his cut, every other thing is meaningless to him. The man lacks emphaty and doesn't care about the welfare of the masses.

some u talk anyhow on on this forum na Tinubu get Dangote refinery?

I used to ask this question about electronics till an ibo man explained it to me this way.

I bought goods at N200 each and while I still have that product in stock, the price increases to N250 at the company. Now I can keep selling the one I have at N200, but that means the amount I make won't be able to buy the same quantity of products when I'm ready to restock, so I have to increase my price to be able to make up the difference when I want to restock. If not I'll be running at a loss.

The same scenario but the price at the company reduces to N150. Let's say I reduce my price to N150 immediately, what's the assurance the price won't increase again by the time I return to the factory? That's a risk no businessman will want to take. So I sell off my current stock at the going price and when I restock, I can then adjust the price accordingly.

I don't know if this makes any sense.

Lithiumite:
Thats the spot price,most oil rates are negotiated on futures contract......prices will definitely come down at the pumps but might take upto 2 to 3 weeks to fo back to pre conflict levels.

Why did this same analogy of yours not apply when they increased prices just a few days after the price of crude oil rose to over a hundred dollars?

Don’t always defend.