morganable Economy watch
The development comes at a time when Nigerian households and businesses are already struggling with high transportation costs, rising commodity prices and the broader economic consequences of elevated energy costs.
KaNo —
Nigerians may face another round of petrol price increases following a sharp rise in international crude oil prices, with Brent crude climbing to $115.18 per barrel on Friday amid escalating tensions in the Middle East and fears of renewed military strikes against Iran.
The development has raised concerns among petroleum marketers and consumers over the possibility of higher fuel costs, particularly as Dangote Petroleum Refinery and other depot owners currently sell Premium Motor Spirit, popularly known as petrol, at N1,350 per litre at their gantries.
The latest increase in crude oil prices could put additional pressure on domestic petrol prices, as refiners and importers contend with rising procurement and replacement costs, which may eventually be passed on to consumers.
According to Oilprice.com, Brent crude, the international oil benchmark, rose by 1.8 per cent to $115.18 per barrel on Friday, reaching a five-month high as geopolitical tensions heightened concerns about disruptions to global energy supplies.
Similarly, United States West Texas Intermediate crude futures increased by two per cent to $101.56 per barrel, reflecting growing uncertainty in the international oil market.
The rally followed renewed fears that the United States could launch another round of military strikes against Iran in the coming weeks, potentially worsening instability in the Middle East and disrupting crude oil production and exports.
Although Nigerian refiners and petroleum importers have not announced a fresh increase in petrol prices, sustained increases in international crude prices could translate into higher domestic pump prices.
This is because crude oil remains the major raw material used in petrol production, while international petroleum product prices influence the replacement costs incurred by importers and marketers.
The development comes at a time when Nigerian households and businesses are alreaody struggling with high transportation costs, rising commodity prices and the broader economic consequences of elevated energy costs.
A further increase in petrol prices could worsen the financial pressure on consumers, particularly transport operators, small businesses and households that depend on petrol-powered generators for electricity.
The latest developments in the international oil market have been linked to increasing hostilities involving the United States, Iran and other countries in the Middle East.
According to CNBC, concerns over possible renewed military escalation, attacks on energy infrastructure and threats to major shipping routes have contributed to the recent surge in crude prices.
Reuters also reported on Friday that Brent crude touched $115.16 per barrel, its highest level since May 4, following attacks by Houthi militants in Saudi Arabia that heightened fears of further disruptions to energy supplies.
The international benchmark was heading towards a weekly gain of approximately five per cent, marking what could become its third consecutive week of increases.
West Texas Intermediate was also on course for a weekly increase, although its gains were considerably smaller than those recorded by Brent crude.
The renewed uncertainty followed comments by United States President Donald Trump on Wednesday, indicating that Washington was not engaged in negotiations with Iran.
Trump stated that something would happen “fairly soon”, fuelling speculation about the possibility of renewed military action against Tehran.
His remarks came amid reports that American and Israeli officials were considering fresh strikes against Iran after the United States midterm elections.
Iranian authorities have also signalled their readiness to respond to potential military aggression.
According to the Iranian state media agency, Tasnim, the country’s army chief declared that its military was fully prepared for asymmetric warfare following efforts to strengthen its defence capabilities.
The increasing hostilities have extended to Saudi Arabia, where attacks attributed to Iran-allied Houthi militants have raised concerns about the security of critical energy facilities.
The United States Department of State subsequently ordered non-essential personnel to leave Saudi Arabia amid the deteriorating security situation.
On Wednesday, a drone attack targeting the Shaybah oil field in Saudi Arabia’s Eastern Region reportedly killed two people and injured two others.
Another attack on King Fahd International Airport in Dammam reportedly resulted in at least two deaths and eight injuries, according to Saudi state media.
The attacks have heightened concerns about the vulnerability of oil installations and transportation infrastructure across the region.
Reuters further reported that Saudi Aramco ordered employees to evacuate its headquarters in Dhahran and work remotely following attacks attributed to Iran-backed Houthi rebels.
The developments have intensified fears that further attacks could disrupt crude oil production, transportation and exports from major oil-producing countries.
One major concern remains the Strait of Hormuz, a strategic shipping route through which a substantial proportion of the world’s internationally traded crude oil normally passes.
Any prolonged disruption to shipping activities along the waterway could further tighten global oil supplies and increase the cost of transporting petroleum products.
Higher freight charges, insurance premiums and security risks associated with shipping through conflict-affected waters could also contribute to rising international energy prices.
For Nigeria, the implications could extend beyond petrol prices to transportation, manufacturing, agriculture and other economic activities that depend heavily on petroleum products.
Although Nigeria is a crude oil producer and could benefit from higher export earnings when international prices rise, domestic petrol prices remain exposed to changes in crude procurement costs and international market conditions.
The extent of any increase would depend on several factors, including the cost of crude supplied to local refineries, foreign exchange movements, refining margins, transportation expenses and competition among petroleum suppliers.
Dangote Petroleum Refinery, which has become a major supplier of petrol to the Nigerian market, last announced an increase in its gantry price from N1,265 to N1,350 per litre, effective September 12.
The adjustment represented an increase of N85 per litre and added to concerns about the affordability of petrol for Nigerian consumers.
With Brent crude now trading above $115 per barrel, the possibility of another price adjustment remains a concern, particularly if geopolitical tensions persist and international oil prices continue rising.
However, no new petrol price increase has been officially announced, and the direction of domestic prices will depend largely on subsequent developments in the international crude market and the pricing decisions of refiners and marketers.
