Petroleum prices likely to remain high amid Middle East crisis — Osatuyi
By Yunus Yusuf
Mr Mike Osatuyi, a former Operations Controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN), says that petroleum product prices in Nigeria and across the world may remain elevated until stability returns to the Middle East.
Osatuyi disclosed this in an interview on Tuesday in Lagos.
He said the ongoing geopolitical tensions in the Middle East, a region that holds a significant share of the world’s crude oil reserves have disrupted supply and triggered a surge in global oil prices.
He said that war in the region has inevitably pushing up the cost of refined petroleum products.
“The global increase in crude oil prices is largely a result of the crisis in the Middle East.
“The region accounts for more than 47 per cent of the world’s oil reserves and over 25 per cent of global daily crude production.
“Any disruption in such a critical supply hub automatically tightens global supply and pushes prices upward,” he said.
He explained that the rising cost of crude oil directly affects the price of petrol, diesel and aviation fuel worldwide.
He stressed that the situation is governed by the basic economic principle of supply and demand.
“With a significant portion of supply threatened, prices naturally respond upward.
“This is beyond the control of governments or petroleum traders,” he noted.
Osatuyi said the price surge is already reflected in global benchmarks, with Brent Crude Oil trading at about $116 per barrel and West Texas Intermediate around $111 per barrel.
The IPMAN chieftain described the emergence of the Dangote Refinery as a major turning point for Nigeria’s energy security after decades of dependence on imported petroleum products.
“For years, Nigeria relied almost entirely on imports because the four refineries owned by the Nigerian National Petroleum Company Ltd., in Port Harcourt, Warri and Kaduna failed to produce a single litre of refined products for over a decade.
He described the prolonged non-performance of the facilities as one of the most glaring failures in the country’s energy sector.
According to him, successive governments spent huge sums on maintaining and rehabilitating the refineries without meaningful results.
“Between 2010 and 2023, more than ₦11 trillion was spent on rehabilitation, salaries and maintenance of the four refineries.
” While turnaround maintenance alone cost an estimated $18 billion to $25 billion, yet the facilities remained largely non-functional,” he said.
Osatuyi also criticised the resistance by some stakeholders to the proposed privatisation of the refineries in 2007, describing the opposition as unpatriotic given the enormous financial burden on the government.
He noted that even though the Nigerian government now supplies crude oil to the Dangote refinery in naira, international crude prices still determine the cost of refined products.
“As long as international crude prices remain high, pump prices will continue to reflect that reality.
“The pricing structure ultimately follows global benchmarks and the prevailing exchange rate determined by the Central Bank of Nigeria.” Osatuyi added.
He warned marketers against holding excessive product stock during the volatile period, noting that oil prices could fall sharply if the geopolitical crisis is suddenly resolved.
“The disruption in Middle East production could end abruptly, which may cause crude prices to drop dramatically.
“Operators holding heavy stock may face significant losses,” he cautioned.
Despite the high prices, Osatuyi reassured Nigerians that the country is unlikely to face a shortage of petroleum products due to the refining capacity of the Dangote facility.
According to him, the refinery with a processing capacity of about 650,000 barrels per day can produce approximately 57 million litres of petrol, 25 million litres of diesel and about 20 million litres of aviation fuel daily.
He added that the facility also boasts massive storage capacity for refined products, currently estimated at about 4.6 billion litres, with expansion plans expected to raise it to about 5.3 billion litres.
“With this level of production and storage, Nigeria is technically secured in terms of availability of petroleum products.
“However, the cost will continue to reflect the high price of crude oil in the international market.” he said.
He concluded that the duration of the Middle East crisis will ultimately determine how long global petroleum product prices remain volatile.
“The moment stability returns to the Middle East and crude supply normalizes, prices will adjust accordingly,” he said.
