The Department of Petroleum Resources (DPR) has warned that the pump price of petrol in the country may go up to as much as N1000 per litre when the petrol subsidy regime comes to an end if there is no alternative energy source.
The DPR stated this just as some oil and gas experts have advocated for a measure from the government that will ensure that Nigeria gets commensurate value from its abundant oil and gas resources like its fellow oil-producing nations.
This was disclosed by the Director of DPR, Mr Sarki Auwalu while answering questions after delivering a paper titled, ‘A Discussion on the Future of the Nigerian Petroleum Industry’, he delivered in Lagos, recently.
Auwalu said ending petrol subsidy would require making alternative fuel available to Nigerians and that failure to do that will plunge Nigerians into paying higher petrol prices when subsidy is removed with Nigerians probably going to pay as high as N1,000 to buy one litre of petrol in the country. This will require alternative energy or autogas gas policy to become fully operational.
He, however, said the alternative fuel regime comes with initial cost as it will lead to spending $400 to convert one vehicle from running on petrol or diesel to running on either Liquefied Natural Gas (LNG) or Compressed Natural Gas (CNG).
What the DPR Director/Chief Executive Officer is saying
Auwalu reiterated that converting 8 million public vehicles currently present in Nigeria to gas-powered will cumulatively cost $3.2 billion to achieve.
He said: “So, to eliminate subsidy, they don’t call it subsidy anymore now, it’s under-recovery of purchase. So, to eliminate under-recovery, what you need is alternative fuel. Without alternative, you will subject people to higher prices and that is why we go for price freedom.
“As at today, there are 22 million cars in Nigeria. eight million are for public use. Imagine if you want to convert every car into gas, the average cost of conversion is $400. Converting eight million cars requires $3.2 billion. To do that, there are a lot of environmental investors which can invest and recover from the sale of gas and we are encouraging that.
“Once that is achieved, you will see that PMS can be sold at N1000. After all, the average distance covered by one gallon equivalent when you compare it with LNG or CNG with respect to energy for mobility is 2.7 against one. One for PMS, 2.7 for LNG or CNG.
” So, with that advantage, you will see that it creates an opportunity for this industry again. The issue of subsidy, the volume will all vanish and that is what we are working towards.”
He, however, warned that the rise in Nigeria’s local refining capacity as seen in the coming on stream of a number of refineries in the country without a corresponding increase in the country’s oil production volume may threaten the country’s membership of the Organisation of Petroleum Exporting Countries (OPEC).
In case you missed it
The DPR Director had earlier disclosed that the country was only operating 1,300 of its 7,000 reservoirs, noting that the Department aimed to achieve refinery revolution as defined under the decade of gas.
He said that the oil and gas regulator was also optimising the production to ensure that investors get a return on their investments while also reducing the cost of production.
Gold trades below $1,800 as global shares and cryptocurrency market rally
Gold is bearish in the London session today, trading below the $1,800 trading range as the dollar gains momentum on increased investor appetite as a result of improved vaccination efforts and a decline in the COVID-19 cases.
Gold futures is down 0.36%, currently trading $1,796.65 an ounce. Gold is down 1.77% from last week’s high of $1,829 an ounce and the yellow metal looks set to end the week bearish. The dollar index, which usually moves inversely to gold, is down marginally by 0.01% for the day, currently trading 92.75.
Reasons for the bearish trend
Investors’ fears and worries are at ease because the number of COVID-19 cases has declined significantly in over half of U.S. states in the last two weeks. The U.S is now averaging about 52,600 new cases a day, a 26% decline from two weeks ago. With the decline in the number of cases, an increase in economic activity in the country is expected thereby pushing investors to take on more risk other than investing in the yellow metal.
Another factor is the rally in Global Shares. South Korea’s KOSPI 50 gained 1.34%, currently trading 3,002.80 points. In Australia, the ASX 200 gained 1.06%, currently trading 7,386.40 points. Hong Kong’s Hang Seng Index gained 1.84%, currently trading 27,700.62 points, nearing last week’s high. China’s Shanghai Composite edged up 0.34%, currently trading 3,574.73 points and the Shenzhen Component closed bullish by 0.18%, currently trading 636.03 basis points.
In the US market, the DOW closed bullish by 0.83% with 34,798 basis points, the S&P 500 recorded a similar percentage growth of 0.83%, trading 4,358.69 basis points and the NASDAQ gained 0.92%, currently trading 14,632 basis points. These gains recorded in global shares indicates that investors have seemingly moved past concerns about the rising numbers of COVID-19 cases involving the Delta variant and inflationary pressures.
What they are saying
DailyFX strategist, Margaret Yang told Reuters that, “Gold prices are under pressure because the dollar is now hovering around highest in three months and Wall Street rebounded for the second day meaning that traders are shrugging off COVID-19 concerns and back to reflation trade. ECB is widely expected to remain dovish, so this may lead the euro to weaken against the dollar causing the greenback to rise, which will be negative for gold. For now, gold’s near-term momentum seems to be tilted to the downside.”
Investors now await reports from the European Central Bank (ECB) and Bank of Indonesia on their respective policy decisions.
In other precious metals, silver is down 0.61%, currently trading at $25.10 an ounce, palladium is up 0.95%, currently trading $2,680.00 an ounce and platinum is up 0.48%, currently trading $1,080.50 an ounce.
U.S oil crashes below $70 after OPEC+ producers agree to raise output
Oil prices started the week on a decline after OPEC+ overcame an impasse and agreed to boost output, sparking concerns about a crude surplus as the COVID-19 Delta variant continues to spread in many countries.
The U.S. oil is down 2.85%, currently trading at $69.52 a barrel while Brent crude was down 2.65%, currently trading at $71.60 a barrel as of the time of writing this report.
What is causing the decline?
As earlier reported, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed on Sunday to increase oil supply from August to cool prices that this month hit their highest level in over two years as the global economy recovers from the COVID-19 pandemic. They also agreed to new production shares from May 2022 with Nigeria’s quota to increase to 1.8 million barrels per day (BPD) from 1.4 million BPD. OPEC+ last year cut output by a record 10 million barrels per day amid a decline in demand for oil as a result of lockdown restrictions caused by the COVID-19 virus. This prompted a collapse in prices with U.S. oil futures prices at one point falling into negative territory.
What they are saying
Carsten Menke analyst at Julius Baer stated, “Longer-term, free and additional production capacities from OPEC+ countries are the key reason why we see oil moving lower again. We remain confident that the oil market is in the final phase of its upcycle.”
Goldman Sachs had a contrary opinion stated that it remained bullish on the outlook for oil and the agreement was in line with its view that producers “should focus on maintaining a tight physical market all the while guiding for higher future capacity and disincentivizing competing investments.”
ANZ Research stated, “Even with higher output, the market remains relatively tight. High-frequency data is showing encouraging signs for oil, with U.S. gasoline demand recently hitting a record high. This should limit the duration of the selling.”
The resolution of the conflict among OPEC+ members has pushed oil prices downward because members have reviewed output quota upward for some countries including Nigeria. This means more oil is coming into the market to meet the growing demand. However, there are concerns that the Delta variant of COVID-19 will affect the current uptick in demand. Investors are advised to trade with caution knowing these facts.
Oil prices plunge on fears OPEC+ may increase Oil supply
Oil traders are becoming wary that OPEC+ will increase oil output and further distort the energy demand/supply dynamics.
Oil prices lost more than a percent at the second trading session of the week. Oil traders are virtually going to extend short on concern that OPEC may agree to increase global supply in a meeting this week and Chinese demand may be dropping.
At the time of writing this report, Brent crude dropped by 1.2%, to trade at $62.91 after losing 1.1% in the past day. U.S. West Texas Intermediate (WTI) crude dropped by 1.2%, to trade at$59.90 a barrel, having lost 1.4% on Monday.
Oil traders are becoming wary that OPEC and its allies, a group often referred to as OPEC+, will increase oil output and further distort the energy demand/supply dynamics.
The group meets is scheduled to hold on Thursday as discussions might include allowing as much as 1.5 million barrels per day of crude oil back into the market.
Stephen Innes, Chief Global Market Strategist at Axi in a note to our source explained why the OPEC+ meeting matters most to many oil traders.
“Constructive oil market fundamentals have blown slightly off course ahead of the OPEC + meeting on Thursday as oil prices took to the plunge pool overnight, with Brent back to the soft US$63 handle after trading as high as $66.82 only last Thursday.
“Commodities were mostly weak overnight as the dollar regained a bit of ground. OPEC+ will meet this Thursday, and expectations are that despite Saudi Arabia’s call for caution, most members will push for an increase in output,” Innes stated.
Bottom line: energy pundits expect the all-important meeting this week in being one of the most interesting oil meetings in Q1, with Saudi Arabia urging producers to remain “extremely cautious”.
Follow us on Twitter
LG polls: Voters with Temporary Cards can vote – LASIEC
NEMA records zero accident on roads in S/East in Eld-el-Kabir — Official
Gains in OANDO, TOTAL bolsters bullish sentiments in Nigerian stocks
Ethereum whales increase their Ether holdings by 84%
How to register for FG’s N75 billion MSME survival funds
Cardi B accidentally leaks her nude photo amid whirlwind birthday festivities (18+)
Subscribe to Blog via Email
Business6 days ago
Lagos announces movement restriction on Saturday
NEWS6 days ago
Ransomware: Hackers demand $50 million in Crypto from Saudi Aramco
CURRENCIES6 days ago
CBN to launch digital currency by October
NEWS6 days ago
Insecurity: Six A-29 Super Tucanos arrive Nigeria
Business5 days ago
Nigeria facing acute jobless crises – World Bank
Business5 days ago
Dangote cement’s $1 billion new factory in Edo state to start production
MARKETS5 days ago
US tech stock dominates as Twitter soars in overnight trading
Business5 days ago
Poultry Association warns of 10% job losses