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Oil marketers demand pricing formula, legislation to sustain monthly adjustments

Operators in the downstream sector of the oil and gas sector have asked the Federal Government to unveil a pricing formula that will guide the monthly adjustments in the pump price of premium motor spirit (PMS) otherwise known as petrol in order to avoid dislocations at the retail end of the value-chain.

According to the operators, many marketers are keeping low stock towards every month end due to the uncertainty surrounding the price of the commodity, especially as government, through the Petroleum Products Pricing Regulatory Agency (PPPRA), still determines the price the product was being sold despite deregulation.

They noted that a pricing formula would guide marketers and consumers on what to expect anytime there is a movement in the price of oil, especially as the country does not control the price of crude oil in the global markets.

The operators, including OTL Africa Downstream, Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria and Petroleum Products Retail Outlets Owners Association of Nigeria, during a webinar yesterday, expressed concerns about the style of market deregulation including pricing, business models, competition, new investments and value-creation in the downstream petroleum Industry.

Chairman of Major Oil Marketers Association of Nigeria, Adetunji Oyebanji, said the pandemic has presented an opportunity for Nigeria to take some decisions as regards the downstream operations.

With some fundamental changes being proposed, he advocated the need for appropriate laws to back up actions, noting that with government retaining price control, it will always be under pressure to adjust the price due to political considerations.

“We believe that if the market determines the prices, there will be marginal changes rather than everyone rallying around to change prices. Marketers continue to advocate a proper legislation to allow market dynamics prevail. This because people keep low stock towards month end because they fear price reduction and are worried that they might be unable to plan effectively.

“Government must ensure that there is a level playing field by removing monopolies, while a strong anti-competition agent should be in place to discourage operators from taking advantage of a free system. Like it has been done in other countries, we need a strong agency that sanctions infractions and help to mitigate price gouging”, he added.

On the benefit of subsidy to marketers and the PPPRA’s decision to allow operators commence import, Oyebanji said, there is no particular benefit to marketers because subsidy is not an income to operators.

“There was never a time government stopped anyone from importing fuel. Economics is what has allowed marketers to import. Government never stopped marketers from importing; it just didn’t make economic sense given the fixed price. The present situation allows operators to import and recoup their investments”, he added.

Managing partner, Teno Eenrgy Resources Limited, Timothy Okon, explained that luxury of suggesting that we can determine a price of a product that we do not control its price in the international market cannot stand.

“We can have a pricing formula to determine the value of how much the refined product will be sold, rather than having a fixed price. By doing this, this helps to address challenges with pricing in the sector. Taxes should also be taken into consideration, as the commodity is also a pollutant that has consequences for the environment.

“If a commodity’s price changes, factors of demand and supply need to be considered before reflecting the changes in the refined products. Depletion tax needs to be paid on such a commodity that is being depleted. We have challenges because we don’t look at these fundamentals. These issues becloud how a product is priced. We are not doing a good job in that regard”, he added.

The Managing Director, OVH Energy Marketing Limited, Huub Stokman said healthy competition is in the interest of the consumer and gives consumers the choice to go where they want to go, adding that a full deregulation is giving competition a fair chance to ensure consumers get value for money.

Chairman, DAPPMAN and MD/CEO, Northwest Petroleum and Gas Company Limited, Dame Winifred Akpani, said while deregulation doesn’t necessarily mean paying more; added that with full deregulation, the pump price of fuel would have dropped below N125 and competition would have been enhanced.

“There is a lot of inefficiency in the system and deregulation will help to address such inefficiencies and help to check costs that some operators may impose on consumers”, she said.