Diesel price, petrol subsidy may soar as crude hits $ 87
NIGERIA’S manufacturers and businesses struggling due to the lingering energy crisis may have more to worry about, as oil price, yesterday, soared to $ 87.16 per barrel.
The rising prices, which should have been a blessing to the country, may mean more trouble for the economy, as the development might increase the subsidy for Premium Motor Spirit ( PMS) in the face of importation.
The oil rally follows an indication that OPEC+ would not introduce any policy change during their next week’s Joint Ministerial Monitoring Committee ( JMMC) meeting.
Notwithstanding denials from government, The Guardian had reported that Nigeria is paying about
N907.5 billion subsidy on PMS, otherwise called petrol, monthly, as oil price and depreciation of the Naira pushed the actual cost of litre of fuel to N1,202.7.
With the rise in the price of crude, Nigeria, which is unable to produce enough oil to meet the 2024 budget benchmark of 1.78 million barrels daily, may have to spend more to keep the price of petrol at the current pump price.
Businesses and the manufacturing sector may also see the price of diesel, which now hovers around N1,700 per litre in some parts of the country, begin to move North.
Beyond the OPEC+ stand, geopolitical tension, especially the shifts in Russia and Ukraine war, as well as failed Israel- Gaza conflict resolution, is creating more tension for the oil industry.
While OPEC+ members had agreed to voluntarily cut 2.2 million barrels per day ( bpd) from the group’s production this quarter, including Saudi Arabia’s 1 million bpd slash, Saudi Arabia,
Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria, Oman and Russia have started cutting their respective oil production and exports in the first half of 2024, with extra voluntary reductions, apart from the intentional cuts agreed on by OPEC+ in April 2023, and later extended until the end of 2024.
Stakeholders have projected a tighter market, even as global economies fight off recession and the Fed sticks to its tentative plans for rate cuts this summer.