Diesel rises 184%, defies global oil price swings

The market price of diesel in Nigeria has surged 184 percent from January to December 2022 despite the fall in global crude oil prices towards the end of last year, with Brent crude averaging $80 per barrel.

According to the National Bureau of Statistics, the average retail price of Automotive Gas Oil, also called diesel, paid by consumers rose from N288 in January to N818 in December. On a month-on-month basis, it increased by 1.11 percent from N809 in November.

As the cost of diesel is not regulated by the government, marketers use it as an advantage to generate profit for themselves, experts say.

Brent crude, the international oil benchmark, has declined by 34 percent from a high of $122 per barrel when the Russia-Ukraine war intensified. In December, Brent averaged $80.92, the lowest last year.

A survey by BusinessDay showed that marketers are still selling diesel at an average of N800-N810 per litre despite the drop in oil prices.

Godswill Agodichi, a supervisor from Continental Waste Management, told our correspondent that he brought diesel last week for N850 per litre in Apapa, Lagos.

He said the current diesel price is negatively impacting on frequency and efficiency of service to tenements “since our compactor trucks could only move after they have been fuelled, and this is directly related to payment receipts from serviced clients which are dwindling by the day”.

“For our business, which is about 80 percent transportation with diesel engine trucks, it is clear that this unprecedented diesel price increase is a major blow to our operations,” Agodichi said.

Analysts told BusinessDay that the rise in diesel price was due to depreciation in the naira, the global energy crisis, supply challenges and the absence of regulation.

“Diesel is a critical product of the crude oil value chain and the global oil price is a key factor in determining its price,” said Etulan Adu, an oil and gas production engineer.

“In Nigeria, the following factors affect the price of diesel: the cost of crude oil; refining costs and profits; costs of retailing, marketing, and distribution; taxes and government policies on diesel fuel price and imbalances in the demand and supply of diesel fuel.”

Adu said the seasonality of the market, cost of transportation and diesel price market competition affect the cost of the product.

According to Etulan, as much as the country’s refineries are dysfunctional, the supply side will be affected as the country would rely mostly on imports.