₦airaland Forum

I will used Nigeria context. You see fuel price in Nigeria doesn't move like a forex chart you are doing...its politics.

So the real reason is that when oil went up, NNPC adjusted pump price up. But when oil came down, our government didn't bring price back down, because they're now covering other costs: naira devaluation, subsidy removal, distribution costs, and frankly, nobody is forcing them to reduce it too. See the way your are speaking up now...how many people are? Exactly...very few

Also, our naira is additional killer here. Even if crude is $74 per barrel globally, Nigeria is buying refined fuel in dollars and selling it in naira. Dollar is still around ₦1,350+. So the dollar cost of importing fuel hasn't dropped enough to matter.

You're still right o...Forex absolutely affects this but it's the naira to dollar rate that's the real problem, not the crude price.

Nigeria would need a strong naira AND functioning local refineries for pump price to actually follow crude down.
Dangote refinery is supposed to fix part of this. But we'll see.

Alexas58:
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

Hussein035:
Na lie

The same oil station increased their pump price just 5 minutes of getting the news of $118 per barrel

They sold old stock of #850 for #1300

Well nobody should push this blame on PBAT, out greedy businessmen should be held responsible

You are clearly not a business person. Let me help you, and it's up to you whether you learn from it or continue to argue.
For example, if you have 100 litres of fuel that you bought for ₦100,000, that's ₦1,000 per litre, right? Then you hear that the replacement cost has increased to ₦1,200 per litre. It is only logical to increase your selling price immediately so that you can still afford to maintain your 100 litres of stock.
If you don't, your ₦100,000 will only buy 83.3 litres instead of 100 litres when it's time to restock. That means your stock level will drop significantly over time.

Na this simple business principle many people no dey understand.

I am in Canada, and as soon as prices of crude went down, this impacted fuel prices immediately. As in immediately.
Even where there is no war, and some random events happen that affects supply, prices will go up. But you know what, the prices always come down when those events stop.
Nigeria is a strange or inflated economy as someone earlier explained. Demand should naturally influence prices. But in Nigeria the reverse is the case.
All these arguments about old stock and prices is just lame, and I have no energy arguing with such people. Let's see how long it will take for them to sell 'old stock', and then bring the price down. Get ready to wait forever! Nigeria is a corrupt entity, period!

ogascomax:
Don't take Nigerians for granted. Nigerians played a significant role in building Dangote refinery. Dangote that end up sacking the Nigerians that helped him build the refinery and replaced them with Indians.
I have being in the oil industry and Nigerians are doing a lo

So because Nigerians helped to build Dangote refinery, Dangote must sell fuel to them at N200 per liter, meaning he loses money, can't keep his refinery up, the refinery crashes and burns, and we are back to wasting forex on imports....meaning our budget takes a big hit, and we get more debt

Thanks.

Now back to your theory. Tell me what Saudi Arabia and Russia that is doing differently that makes the product cheap.
South Korea controlled pricing during the global spike in price.
In Nigeria anything goes. It's about interest.

1. Saudi Arabia has 40 million people and produces nearly ten times as much oil as Nigeria.

They got the money, we don't. (and please don't annoy me by trying to argue on this. Also, Saudi has corruption and wasteage issues).

2. Russia has a diversifed economy that earns it more money than NIgeria. In particular, they have an economy that exports manufactured goods and services

Economies like that have far more money than countries that sell just one thing like oil.

Also, their attempt to control prices of fuel is straining their economy.


3. Nigeria is a nation where most government revenue comes from oil. 1.3 m bpd for 230 million people. Even when it was 2.4 million bpd, it still was not enough.

We do not have an actively exporting industry, tax to gdp is so low that it is even lower than freaking Niger republic, and our gdp is bad because we do not even have an industrial base that exports.

You mentioned South Korea,...who has a diversifed economy, and industrial economy that exports...is home to global brands like Samsung,. Hankook and Hyundai, among others, and has something we don't have, a working tax system. They were able to control the price because they freaking had the money to do so...AND EVEN THEN...it was for a short period of time, it wasn't forever.


Money doesn't grow on trees, man.

For the record, to bring about price control in fuel, since no money was budgeted for it in the budget, it means that money must be taken from the -pre-existing budget and replaced with loans or salaries and projects would be stalled....to get your price controls

More loans, more debt.

Don't argue with me, because I am getting annoyed with the kind of thinking patterns on this site. Even with price controls in South korea, fuel is still expensive there.

Homextras:
I am in Canada, and as soon as prices of crude went down, this impacted fuel prices immediately. As in immediately.
Even where there is no war, and some random events happen that affects supply, prices will go up. But you know what, the prices always come down when those events stop.
Nigeria is a strange or inflated economy as someone earlier explained. Demand should naturally influence prices. But in Nigeria the reverse is the case.
All these arguments about old stock and prices is just lame, and I have no energy arguing with such people. Let's see how long it will take for them to sell 'old stock', and then bring the price down. Get ready to wait forever! Nigeria is a corrupt entity, period!

Canada also has a lot of functioning refineries and a good enough transport system and as a result can do that

Also, since you live in Canada, you probably know your filling station has a shop where you can buy stuff. That's where they make their money, not from selling fuel. Ditto in the USA.

Then again, prices in Nigeria are coming down, albeit gradually...the importers of fuel are cutting their exdepot price to a level below Dangote's own price...which means dangote is going to have to follow suit.

Alexas58:
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

they have used the excess profit they got when the feul price increases to get cars ans builds houses. Nigerians for you

Lekan239:
they have used the excess profit they got when the feul price increases to get cars ans builds houses. Nigerians for you

If they did that, they won't have much of a business.

Most profits do not go into the pockets of the rich businessman. There is taxes, debts, improvements, maintenance, transport costs, etc etc.

Maybe the owner of a filling station may see a tiny amount at the end of the whole story.

Also, strait of hormuz is not yet quite calm.

nairalanda1:
Canada also has a lot of functioning refineries and a good enough transport system and as a result can do that

Also, since you live in Canada, you probably know your filling station has a shop where you can buy stuff. That's where they make their money, not from selling fuel. Ditto in the USA.

Then again, prices in Nigeria are coming down, albeit gradually...the importers of fuel are cutting their exdepot price to a level below Dangote's own price...which means dangote is going to have to follow suit.

I disagree respectfully bro. Not only in oil and gas. If a major event affects the supply of a commodity in Nigeria, and then the prices go up, you will never see the price come down when that event is addressed. Also, the shop in filling station is just an add-on. At times, a different vendor runs that shop, and only pay lease.
Nigeria is just a corrupt entity with weak regulatory oversights.

Homextras:
I disagree respectfully bro. Not only in oil and gas. If a major event affects the supply of a commodity in Nigeria, and then the prices go up, you will never see the price come down when that event is addressed. Also, the shop in filling station is just an add-on. At times, a different vendor runs that shop, and only pay lease.
Nigeria is just a corrupt entity with weak regulatory oversights.

Nope, it is just business people protecting their profit margins, so that they do not go out of buisness

And anyway, prices are coming down here.

Lithiumite:
Every sensible person knows prices will go up immediately your supply price goes up because you already anticipate it will cost more to restock.... every wise person will hedge against the price increase......its simple logic ,its really pathetic this beats many of you hollow

This is the thing with ignorant folks
They just keep jumping everywhere muddling things they don't even understand up in a bid to sound intelligent
You mentioned futures price being used to hedge against variation in crude price one post back to explain why there's immediate change in spot price recently. Now you're saying something else that's totally opposite that logic by using spot price change to justify future purchase.
You really need to stop typing. You just keep exposing your ignorance.
Stay in one place. Is crude supply price based on spot or futures? Decide on one and stick to it

nairalanda1:
If they did that, they won't have much of a business.

Most profits do not go into the pockets of the rich businessman. There is taxes, debts, improvements, maintenance, transport costs, etc etc.

Maybe the owner of a filling station may see a tiny amount at the end of the whole story.

Also, strait of hormuz is not yet quite calm.

this is how it should be in businesss, and this is how it is over the world. But remember we are talking of Nigeria here, business man want to make all there capital back within 6month and everybody want to build houses upon houses and buy latest cars. Greedy.

Lekan239:
this is how it should be in businesss, and this is how it is over the world. But remember we are talking of Nigeria here, business man want to make all there capital back within 6month and everybody want to build houses upon houses and buy latest cars. Greedy.

It's the same in Nigeria too

yemre:
Excess money was created long before the strait of houmouz was blocked. All we experienced since Feb 28 till now is as a result of the Iran-US-Israel crisis which led to the closure of the strait and it resulted in reduction in oil supply all over the world. The demands then overwhelmed the supply and that triggered the hikes.

So, it has nothing to do with the injection of funds into the circulation

You are not getting my point. When the strait of Hormuz was closed, yes oil prices and petroleum products rose in prices but let's talk about the effects on monetary economics.
Many Nigerians and there businesses has no other option than to borrow money from banks will creates money into circulation hence increasing the money supply. This excess money created as the effect of war has result in having more nairas chasing after few good and services than before and until they pay the loans to destroy the money created. The prices of goods and services may not decrease as before the war.

Gboss247:
You are not getting my point. When the strait of Hormuz was closed, yes oil prices and petroleum products rose in prices but let's talk about the effects on monetary economics.
Many Nigerians and there businesses has no other option than to borrow money from banks will creates money into circulation hence increasing the money supply. This excess money created as the effect of war has result in having more nairas chasing after few good and services than before and until they pay the loans to destroy the money created. The prices of goods and services may not decrease as before the war.

Oh yeah! I agree with you.

But remember, the cause still remains the blocked strait! It triggered inflation, which also triggered injection of funds into the circulation.

Truly, the funds need to be mopped up before things actually normalize but the fact remains that prices of goods and services will never reverse to exactly what it was before the hikes. It might get close but it's would never get there.

It's more like a bitter pill to swallow but that is the reality.