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21.10.2008 Business & Finance

Reduce fuel prices now!


As a result of the huge bill the government has to foot to import and refine crude oil, which was affecting our foreign exchange reserves, it decided to come out with the deregulation policy. Under this policy, Oil Marketing Companies (OMCs) are at liberty to import crude or refined oil for sale on our local market.

The deregulation also led to the establishment of the National Petroleum Authority (NPA) to regulate the operations of the OMCs. The NPA was charged to have a monthly review of ex-pump prices of petroleum products, based on the price at the international market. Since then the NPA has been carrying out this monthly review of prices with the ex-pump price either de-increasing or increasing.

In July this year, the price of crude oil went skyrocketing, hitting $147.5 per barrel, due to the unstable nature of the gulf region and rebel activity in the Niger Delta of Nigeria. With tension in the aforementioned region reducing drastically and the recession in Europe and America mainly due to the credit crunch, as well as increased production of crude oil, the price of oil came down to its current lowest of $65.45 per barrel.

This downward spiral of oil prices was also caused by the USA law to pump $750 billion into collapsing financial institution in the sub-prime sector.

Though this drastic reduction has been consistent for sometime now, government through the NPA has refused to review the ex-pump price of oil in the country. The government has also failed or refused to inform the public about why the local price would not be reduced, despite the fall in price at the world market. We, however, have information that the former is trying to recover $250 million that it used to subsidize the price in May, when the price hit $147 per barrel. We find this attitude of the government as being at variance with the laws establishing the NPA and the deregulation policy as a whole.

We submit that nobody asked the government to come out with that subsidy when it had already deregulated the sector for market forces to determine the price. Refusing to reduce the price is therefore inconsistent with the policy that the government itself has formulated. Granted that the above subsidy is genuine, we at The Chronicle still insist that ex-pump price of petroleum products must be reduced because the world price of the product, as we noted earlier has been reducing consistently for sometime now and government should have by now recovered this subsidy.

The Chronicle is very critical about the issue because government itself projected the world price of crude oil per barrel within this fiscal year to be $85, therefore, it does not make sense to the ordinary man when the price had been reduced below the projected figure yet the government is refusing to reduce the ex-pump price. When the NPA was making upward adjustment of the ex-pump price, nobody complained because everybody was aware that the price had gone up at the world market. The government should therefore not think that the people would not complain when they have seen the price-reducing day in and out.

We are now living in a global world where everybody can access information through the Internet and therefore the government must not underrate the intelligence of the people. We insist that subsidy or not, the price must come down in consonance with the deregulation policy.