Nigerians are facing fresh pressure from rising petrol prices as Brent crude climbed above $109 per barrel on Monday amid escalating tensions around key global oil shipping routes, with the pump price of petrol already reaching about N1,500 and diesel at N2,000 per litre in parts of the country.
The rise in crude prices came as Gulf states called off a planned meeting with Iran on reopening the Strait of Hormuz, while Yemen’s Houthi fighters launched dozens of missiles and drones at Saudi Arabia’s King Khalid Airbase in Khamis Mushait.
The development has heightened concerns about crude oil supplies and the movement of petroleum products through the Strait of Hormuz, one of the world’s most important energy shipping routes.
According to Oilprice.com, Brent crude rose by more than three per cent when markets reopened on Monday, trading above $109 per barrel, while West Texas Intermediate crude traded at about $104 per barrel.
The crude price increase is expected to sustain pressure on the Nigerian downstream market, where consumers are already grappling with rising pump prices.
The PUNCH reports that petrol prices have climbed to about N1,400 or N1,500 per litre in some parts of the country, following a series of increases in the ex-depot and gantry prices of the commodity.
Dangote Petroleum Refinery had on Saturday increased its gantry price of petrol from N1,265 to N1,350 per litre, representing an increase of N85 per litre.
The latest increase marked the fourth upward adjustment in the refinery’s gantry price since August 21, when petrol sold for N1,165 per litre. Within about three weeks, the refinery’s gantry price increased by N185 per litre, representing a rise of about 15.9 per cent.
The latest development has renewed concerns among Nigerians over the possibility of petrol prices rising further, particularly as international crude prices continue to respond to the worsening geopolitical crisis in the Middle East between the United States and Iran.
The crisis around the Strait of Hormuz has raised fears of disruptions to global oil supplies. Adding to the concerns, a drone attack on Friday reportedly disrupted Saudi Arabia’s East-West pipeline, the kingdom’s major alternative route for transporting crude outside the Strait of Hormuz.
The pipeline, which has the capacity to carry about seven million barrels per day to the Red Sea port of Yanbu, could become critical if disruptions around Hormuz persist.
Reports indicated that a prolonged disruption to the pipeline could affect a significant volume of global oil supplies. The crisis has also extended towards the Bab al-Mandab Strait after the Houthis reportedly captured Perim Island and deployed fighters on the Greater and Lesser Hanish islands.
The Bab al-Mandab is another critical global shipping route, carrying a significant volume of international trade, including crude oil and liquefied natural gas. The simultaneous pressure on the Strait of Hormuz and the Bab al-Mandab has raised fears that two of the world’s most important energy chokepoints could be affected by the conflict.
For Nigeria, the development is coming at a period when petrol consumers are already lamenting the rising cost of transportation and other goods and services. An increase in petrol prices typically raises transport costs, with the effect spreading to food distribution, logistics and the prices of other commodities.
The latest crude rally also raises questions about the direction of petrol prices in the coming days, particularly if the Middle East crisis leads to further disruptions to global crude supplies.
Across various social media platforms, Nigerians appealed to the government to intervene and prevent the surge in fuel prices from eroding the government’s economic recovery gains.
The situation has become more significant for the Nigerian market following the recent upward adjustments in the price of petrol supplied by the Dangote refinery.
The refinery’s N1,350 per litre gantry price is expected to translate to higher prices after marketers add transportation, storage, financing and other costs before selling to consumers.
The development also revives concerns over the relationship between the cost of crude oil and petrol prices in Nigeria. Brent crude is now trading above $109 per barrel but remains below the more than $115 per barrel level reached during an earlier period of the Middle East crisis.
However, the Dangote refinery’s gantry price has now risen to N1,350 per litre, higher than the level at which the refinery sold petrol when crude traded at the earlier peak.
The refinery had previously attributed some delays in reflecting changes in international crude prices in its petrol prices to the cost of crude inventories already purchased and held by the company.
The renewed rise in Brent, however, means that the pressure from the cost of crude could intensify if the geopolitical crisis persists. For millions of Nigerians, however, the immediate concern remains the price displayed at filling stations, as rising petrol costs continue to increase the financial burden on households and businesses.