Crude Price Crash: Port users in quandary over Government’s next action

former Minister of Petroleum Resources, Mrs Diezani Alison-Madueke

…As OPEC vows not to change output even if price drops to $40

Nigerian Port users are now in quandary over the ongoing southwards slide, in the price of crude petroleum, with many wondering if Government would also effect a corresponding slide in fuel pump price in Nigeria.

President Jonathan Goodluck
President Jonathan Goodluck

Their confusion became audible, sequel to a galloping downward slide of the item in the international market, which puts the Brent, on a five-year low of $63 per barrel, even as pump price in the United States of America, crashed by over $1 per gallon.

Some however wondered if Government would not punish them for the slide, by further raising the pump price, essentially, to enable government create a new base for revenue generation, now that earlier hopes and projections, targeting bumper revenue generation from crude export has collapsed.

Specifically, some of them wanted to know if the usual threat of pump price hike, especially around Christmas and the New Year, would still be tenable, based on stale arguments, often anchored on “subsidy removal”.

“Do you know how many times they have hiked pump price around Christmas and the New Year? And do you recall that their normal excuse was usually anchored on subsidy removal? For some of us, the Christmas comes with a tingling fear of fuel hike in the background”, the importer, who simply identified himself as Adegbola indicated, asking whether any excuse, based on subsidy removal or international pricing system was still tenable.

Speaking in the same vein, another port user, Ben Ugonna expressed his fears, that he had hoped that by now Government would have come out to clear the air or something, stressing that when products went scarce in several petrol stations last week in Lagos, he immediately began to pray,not knowing whether it was the usual artificial scarcity at Christmas seasons, followed by black-market sales and finally a hike that was initiating.

“For some of us who travel home at Christmas, we are very much used to it; one day fuel is there, the following day small queue would begin; the small queue would turn into snakes, and those who can’t queue would start buying black-market along Ikorodu Road!

“We are used to it. But I just hope that this time around, somebody in Government would say something. Anything. Let them at least tell us that they are on top of it, and that Nigerians would not be punished, for the slide”, he said.

But an industry watcher, Anthony Emeordi advised that Nigerians should keep their peace, noting that if Government hiked pump price when crude price in the international market was high, claiming varying degrees of subsidy removal, it should not lack the moral courage to slide the pump price now, after all, pump price in the US has similarly crashed, by over a Dollar.

“I am expecting fuel pump price to crash any time from now. This Government is a highly responsible one. I also know that it does not sell fuel; it only ensures it is available. So, if it protected Nigerians from fuel merchants and importers, by offering subsidy, I see no reasons why it should not further protect the citizens, now that the marketers would equally be buying their cargo more cheaply, from where ever they have been buying”, he said, stressing that Nigerians must nevertheless be on the alert, to ensure that the fuel importers do not continue to sustain the present pump price, on the ground that they must first deplete their old stock, before favourably, altering fuel prices.

It may be noted that price crash in the international market may not be unconnected with the discovery of new shale of crude petroleum in the US and elsewhere, new technological breakthrough which has made it possible for the US to pump out product, faster than its local market had hitherto experienced; and thirdly, the un-willingness on the part of OPEC members, to slash product supply and stabilize prices.

Meanwhile, OPEC will stand by its decision not to cut crude output even if oil prices fall as low as $40 a barrel and will wait at least three months before considering an emergency meeting, the United Arab Emirates’ energy minister said.

OPEC won’t immediately change its Nov. 27 decision to keep the group’s collective output target unchanged at 30 million barrels a day, Suhail Al-Mazrouei said. Venezuela supports an OPEC meeting given the price slide, though the country hasn’t officially requested one, an official at Venezuela’s foreign ministry said Dec. 12. OPEC is due to meet again on June 5.

“We are not going to change our minds because the prices went to $60 or to $40,” Mazrouei told Bloomberg at a conference in Dubai. “We’re not targeting a price; the market will stabilize itself.” Mazrouei said current conditions didn’t justify an extraordinary OPEC meeting. “We need to wait for at least a quarter” to consider an urgent session, he said.

The U.A.E. hasn’t been informed of any plan for an emergency meeting, Al-Mazrouei said. OPEC Secretary-General Abdalla El-Badri said, “we don’t know,” when asked at the same conference about the possibility of such a meeting.

Brent crude, a pricing benchmark for more than half of the world’s oil, slumped 2.9 percent to $61.85 a barrel in London on Dec. 12, for the lowest close since July 2009. Brent has tumbled 20 percent since Nov. 26, the day before OPEC decided to maintain production. U.S. West Texas Intermediate crude dropped 3.6 percent to $57.81 in New York, the least since May 2009.

The 12 members of the Organization of Petroleum Exporting Countries pumped 30.56 million barrels a day in November, exceeding their collective target for a sixth straight month, according to data compiled by Bloomberg. Saudi Arabia, Iraq and Kuwait this month deepened discounts on shipments to Asia, feeding speculation that they’re fighting for market share amid a global supply glut.

(Additional reports from Bloomberg)