Cost of cooking gas falls 30% on lower International oil, gas prices

In the last two months, the price of refilling a 12.5kg cylinder of Liquefied Petroleum Gas (cooking gas) has reduced by 30 percent on the back of lower crude oil prices and a decline in international gas prices.

In a survey of major cities in Nigeria, the price of cooking gas is trending downwards to N7,000 currently from N10,000 two months ago.

Martha Ogunsanya, a resident of Shimawa, Lagos, said she noticed the price fall from N850 per kg at the end of April to N600-N550, but that the local gas retailers in her area still sold per kg for N800.

This development eases some of the burden on cash-strapped households, who have been dealing with a hike in the price of the commodity since the beginning of last year coupled with the recent surge in petrol prices as a result of subsidy removal.

“LPG is an international commodity, with about 65 percent of domestic gas coming from imported sources,” Oga Adejo-Ogiri, executive secretary of the Association of Local Distributors of Gas, said.

He said prices in the country are linked to an international benchmark called Mont Belvieu, which has been on the downward slope for the last couple of months.

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Mont Belvieu is the site of the largest underground storage facility for liquefied petroleum gas in the US. The US LPG market pricing indicator is driven primarily by the Mont Belvieu market and reported daily by the US Energy Administration.

Adejo-Ogiri said that imported gas prices are declining, which is reflected in the local market.

Olufola Wusu, partner and head of oil and gas at Megathos Law Practice, said crude oil prices typically influence domestic LPG prices in the international market; as the price of crude oil rises, LPG prices often follow suit.

“The currency exchange rate is another factor, as importers require dollars to import LPG. The rise in the cost of local and international shipping and the surge in demand for LPG during a cold winter are also factors affecting the price of LPG,” he said.

The United States of America and Argentina are the major suppliers of gas to Nigeria. But the Russia-Ukraine war, which started in February last year, triggered a surge in gas prices in these countries, especially the U.S.

But recently, the prices have been falling. According to the U.S. Energy Information Administration, the current price of natural gas dropped by 76.1 percent to $2.10 per one million BTU on May 31, 2023, from $8.78 per one million BTU. May’s price, which has consecutively declined since December 2022, is also the lowest since September 2020.

Before the drop in cooking gas prices, some households resorted to alternative energy sources such as coal, sawdust, kerosene, and other dirty fuels that harm their health. Over half of the 113 million poor Nigerians cook with dung, wood, or charcoal, according to the National Bureau of Statistics.

The drop in prices will relieve the pressure on household incomes, thereby reducing household spending, said Abiola Gbemisola, a consumer analyst at FBNQuest.

Nigeria has nearly 209 trillion cubic feet of natural gas reserves, which ranks as the ninth largest in the world, but harnesses only about eight billion standard cubic feet per day of gas, and most of it is sent to the export market. Dearth in LPG forced the NLNG to stop exporting all the volumes it produces, and even then, Nigeria still imports over half of its demand.

“We have challenges; for example, gas cannot get to the customers directly; if you do not drill wells or build facilities to process gas, there will be no gas at the end market,” said Dabotekenari Alabo, general manager, crude oil and gas commercial at TotalEnergies.