FUEL IS NOT SUBSIDIZED
by The Guardian Newspapers, Wednesday, 28 December 2011
Agbon, who has spent over 30 years in the industry and the academia, Agbon, insists that the true cost of a litre of locally refined or imported petrol is between N34.36 and N39.30 in that order. No more!
Agbon’s calculations, which took into account profit margins, transportation, refining and all other possible costs of producing a litre of fuel, came to the conclusion that the government is either not sincere or ignorant of the true figures of the cost of selling a litre of fuel on the streets.
According to him, the government’s argument that a litre of petrol should be sold at the international price of $3.35 or N139, the same cost on the streets of New York, is fallacious because a gallon of gasoline (four litres), which sells for $3.52 in New York cannot be sold in Nigeria for the same price because the government wants Nigerians to buy crude already allocated for local consumption at the international cost.
Agbon said: “What is the true cost of a litre of petrol in Nigeria? The Nigerian government has set aside 445,000 barrels per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel. Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 159 litres.
“The price of one barrel of petrol at the depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution costs are $1.50 per barrel. The distribution margins (retailers, transporters, dealers, bridging funds, administrative charges etc) are N15.49/litre or $15.69 per barrel. The true cost of one litre of petrol at the Mobil Filling Station in Port Harcourt or anywhere else in Nigeria is therefore ($5+$12.6+$1.5+$15.7) or $34.8 per barrel. This is equal to N34.36 per litre compared to the official price of N65 per litre.”
Agbon looked at several other variables before arriving at his figures. He says: “If the true price of 38.2 per cent of our petrol supply from our local refinery is N34.36/litre and the remaining 61.8 per cent has a true price of N42.36 per litre, then the average true price is (0.382*34.36+0.618*42.36) or N39.30 per litre. The official price is N65 per litre and the true price of petrol in Nigeria is N39.30 per litre (even with our moribund refineries and imports).”