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Fuel dealers propose higher pump prices
Ayo Olesin and Michael Faloseyi with agency reports
As world oil prices climbed to new record highs last week, major oil marketers have proposed further increases of domestic fuel pump prices.
The Nigerian National Petroleum Corporation has, however, assured that it will continue to supply at existing price band based on firm supply contracts for the third quarter..
Oil prices approached $44 per barrel on Friday due to fears that financial crisis that hit Russia's largest oil company, Yukos, could reduce global oil supplies by two per cent, coupled with market perceptions that the Organisation of Oil Exporting Countries had limited capacity to fill in supply gaps.
Oil futures on the New York Mercantile Exchange rose by $1.05 cents to $43.80 a barrel, after hitting $43.85 at midday, the highest level since the futures contract began trading in 1983. On London's International Petroleum Exchange benchmark, Brent crude also rose 78 cents to close $40.03 a barrel at Friday.
Fuel dealers said that the bullish run in the world market had pushed landing cost of imported white fuel products for August deliveries beyond the upper price band of N45.50 per litre set by the Petroleum Products Pricing Regulatory Agency.
Managing Director, Oando Plc said at a forum of company shareholders that the situation in the international market had increased the landing cost of imported petroleum products from N43.00 per litre for the month of July to N46.00 per litre for the month of August.
He said that the marketers were able to sell at the existing PPPRA price band of between N39.50 to N45.50 because the landing cost of imported products, which formed the bulk of the products supply to the domestic market, was below the domestic price band that ranges between N39.50 to N45.50 per litre.
At present, NNPC supplies constitute about 70 per cent of domestic supplies with the major marketers importing the balance.
The market price is determined by a formula where the majors blend NNPC ex-depot price of N35.00 per litre with landing cost, plus freight, cost of funds, dealers margins and Petroleum Equalisation Fund contribution.
The NNPC has however said that rising crude oil prices in the international market would not affect its operations and that it would continue to supply the domestic market at the existing price band
NNPC sources said that the contractors handling importation of fuel for the corporation were forewarned that they would have to maintain sanctity of contracts signed and would have to deliver at the agreed price irrespective of the situation in the international market.
He said any attempt by any of contractors to act otherwise would attract sanctions that include black listing.
The dealers rely entirely on the international products market to get their portion of the daily supply of petroleum while NNPC get about 15 million litres of its portion of the daily supply from the international market.
However, the Petroleum Products Pricing Agency had last week resumed its campaign on the need to incorporate a fuel tax in the fuel price structure. Its earlier introduction had led to a nationwide protest spearheaded by the Nigeria Labour Congress before it was removed.
Executive Secretary of the agency, Dr. Oluwole Oluleye, had at two different instances justified the re-introduction of a modulator to mitigate the likely fluctuations in the prices of petroleum products
On the international scene, oil dealers have said any disruption to exports from Russia would stretch already tight global stockpiles and leave producer group OPEC with little or no power to counter a supply squeeze.
OPEC, which has been trying to bring prices down for months, is pumping at more than 95 per cent of capacity, the highest for a quarter of a century, giving it little room for manoeuvre in an emergency.
Oil staged its first assault on historic highs on Wednesday after news that Yukos might face a ban on oil sales while courts try to enforce their multi-billion-dollar tax debt, but retreated a shade after Thursday's reprieve by the justice ministry allowed the company to keep pumping. Russian bailiffs on Friday gave Yukos a month to pay its tax debt.
With the 10 OPEC members, excluding Iraq are producing at their highest level in 25 years or since the time of the second "oil shock" that followed the revolution in Iran, spare oil production capacity is now at its lowest in decades.
However, oil analysts do not expect the Russian government to close Yukos down, and even if it did, its domestic rivals could make up the difference in the short term. But this would not be sustainable for much more than a few months.
Nevertheless, with global oil consumption rising at its fastest rate in 24 years, the amount of idle capacity is more likely to get smaller by the end of the year as the winter months tend to boost demand.
The Punch, Monday August 02, 2004
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