Diesel prices in Nigeria may see a decline as Russia turns to Africa and some Asian countries offering generous discounts in the face of Western countries boycotting Russian oil to deny Vladimir Putin a means to finance his war against Ukraine.
However, global diesel prices have not been tracked in Nigeria as the diesel market which operates like a cartel, has marketers fixing uniform prices regardless of international conditions.
Analysts say prices would be determined by which market Nigeria buys from. If it agrees to buy from Russia, prices could see a decline but if it buys from Europe which is struggling to meet demands, then prices could surge above N1000. Nigeria imports the bulk of the diesel for its use as the refineries undergo rehabilitation. Diesel is deregulated in the country.
Western countries placed an embargo on Russian crude and refined products February 5, 2023, to starve Moscow of funding for the war against Ukraine which is set to enter its second year this month.
The EU proposal, submitted last week, called for capping the price of Russian diesel sold to third countries at $100 per barrel for premium products and $45 for discount products.
“If Nigeria reverts to buying from other European nations the first implication is higher crude prices, higher diesel cost,” said Jide Pratt, chief operating officer of AIONA. “Also, the rate our exchange is going we might see diesel at levels close to 1000 per litre.”
Pratt said that Nigeria needs to ramp up capacity for gasoil across modular refineries to curb the rise in diesel prices in the country. The way forward is to expand capacity for the modular refineries running well and put this under wraps even before it begins, he said.
Russia is the biggest exporter of diesel in the world. According to S&P Global Commodities at Sea data, Russian diesel exports to the EU, Norway, and the UK averaged 448,000 barrels per day during the first 18 days of January, down from 663,000 b/d in December and 670,000 b/d in early 2022.
Olufola Wusu, partner and head of oil and gas at Megathos Law Practice, said that several factors tend to influence the price of diesel in Nigeria, they include the price of crude oil, regulatory costs, transportation costs, and costs of refining.
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“It is hoped that Nigeria will achieve some form of local refining capacity in the near future, to help insulate the people from the socio-economic realities of rising diesel prices in a diesel-powered economy.
“The absence of local refining capacity leaves the Nigerian market at the mercy of global imbalances in the supply chain for diesel, which is currently being affected by the hasty switch to renewable energy in Europe and further exacerbated by the war in Ukraine,” he said.
In addition, Wusu said the embargo on Russian oil and gas, in the absence of OPEC (some members are not meeting the OPEC quota) and other major producers ramping up production, may cause global oil and gas markets to further tighten, causing the price of diesel and other energy commodities to rise.
The price of the product will rise further once the scramble for Petroleum products intensifies in Europe, according to Kayode Oluwadare, an oil and gas market analyst.
“Europe can offer higher prices for petroleum products but not Nigeria,” he said.
