Deregulation: How new oil law checks consumer exploitation

Against concerns that the deregulation of the petroleum downstream sector will lead to exploitation of the consumers, an analysis of the Petroleum Industry Act (PIA) indicates that it has provisions to check abuse if the new government, follows through with full deregulation.

It has set up a regulator with powers to promote competition and ensure that players do not engage in anti-competitive practices that could result in price fixing or monopolistic behaviour. It specifies standards for petrol

Ogbugbo Ukoha, executive director, distribution systems, storage, and retailing infrastructure, of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), said during a workshop, organised by Major Marketers Association of Nigeria (MOMAN) and the African Refiners and Distributors Association (ARDA) that the PIA empowers the regulator to promote competition, protect consumers, and ensure market stability and efficiency.

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“On fair pricing, the oil regulator must ensure that the price is fair and reasonable and that companies do not engage in price gouging or other unfair pricing practices.”

“The PIA states that products must be of the highest quality, and consumers are not to be exploited by petroleum product marketers,” said Olumide Adeosun, CEO, Ardova Plc, and chairman, Major Oil Marketers Association of Nigeria (MOMAN), during the workshop.

“Consumers must be treated fairly, and their rights protected in all transactions with petroleum industry players.”

The PIA also establishes that the Authority shall consider existing procedures, practices and standards issued by the Federal Competition and Consumer Protection Commission (FCCPC) in developing customer protection regulations.

In addition, there is a provision for cost recovery and pricing under the PIA. On market-based pricing, Section 205 of the PIA mandates that market-based principles determine the prices of petroleum products in the downstream sector.

“Section 208 of the Act develops a pricing framework that will ensure reasonable returns to operators in the sector while protecting the interests of consumers,” Adeosun said.

“Section 207 of the PIA provides that the pricing of petroleum products shall be cost-reflective. This means that the price of a product should reflect the cost of producing, transporting, and distributing the product.”

Section 169 of the PIA provides that the prices of petroleum products in the downstream sector align with the pricing framework. The Authority can sanction any operator contravening the pricing regulations.