Falling crude prices to maintain pull on petrol prices in 2025
Sopuruchi Onwuka
The price war between the two main refiners in the country-Nigerian National Petroleum Company Limited and Dangote Industries Limited-will intensify in the new year to maintain strong pull on petrol prices as projections are unanimous that crude oil prices will respond to market glut.
A survey of market analysts in the new showed that the price of petrol and other refinery products is expected to take a hit from the projected weak crude oil prices in 2025 year as analysts examine the impact of changes in politics and especially as Donald Trump returns to lead the United States government with pro-oil mindset.
The Oracle Today reports that the United States had in the first tenure of Trump in government achieved energy independence from the bullish crude oil markets and laid a sustainable agenda for the country to satiate internal demands and lead international export of crude oil and natural gas.
Trump who does not hide his support for the petroleum industry enunciated his desire to spur massive search and production of new oil from conventional and unconventional sources in the United States, relying on technology advances that have made exploitation of shale oil lucrative even at low and moderate internationals oil prices.
And despite concerns by some analysts that steep fall in prices might drain incentives for shale oil investments and cause supply crunch in the market, others maintain that projection of weak demand associated with weak demand from the Chinese and European economies would still maintain a pull on crude oil prices.
In Nigeria, falling prices have already knocked off some N100 from a liter of petrol in places like Lags where pump price of petrol has reduced from N1025 per liter to N925.
If projected price for 2025 actualizes at about $60 per barrels, and the NNPC Limited succeeds in bringing its Warri and Port Harcourt refineries back online, then there would be a guarantee of cheaper transportation fuel in the year.
The Oracle Today reports that the national oil company is struggling to deliver a presidential mandate to revive the country’s four refining plants at Port Harcourt, Warri and Kaduna; leveraging on internal policy incentives that enables the company to buy crude oil in Naira. The NNPC Limited buys its crude feedstock requirements from itself though.
The refineries went moribund after decades of mismanagement by the national oil company.
Similar incentives are provided other private refiners in the country, including the Dangote Refinery which has secured a guarantee of feedstock supplies and naira denominated transaction.
Currently, only the Dangote Refinery produces standard quality petrol in the country, while the NNPC boosts its limited production of naphtha with imported high octane gasoline.
However, the while national oil company could run on thin margin to remain in price competition, Dangote Refinery which sits on huge dollar denominated plant development debts cautiously aligns with international price templates to avoid losing shares in the huge domestic fuel market.
Unlike in the past when the end of year demand surge pushed up prices in the Nigerian fuel market, the 2024 experience appears weird as prices dropped instead. Independent players in the local market who still import critical products like aviation fuel reveal that prices of refinery products trail falling crude oil prices.
A survey of analysts’ outlooks by our correspondents showed that JP Morgan’s pundits had predicted that Brent crude would fall to under $70 by the end of the year, while Bank of America expected prices to average $65 in 2024. Pundits at Citi stated that prices would drop to as low as $60.
Popular predictions are that a $60 per barrel crude oil price would directly translate to considerable drop in petrol prices in the global market. And with internal economic policies and strength of the local currency, retail prices to consumers are supposed to see proportional fall in the new year.
With the United States now a swing producer, achieving a low crude oil price in the international market is a feat which analysts swear that Trump would deliver after promising during his election campaign to boost domestic oil production, provide policy support for aggressive exploration and also sanction new export gas liquefaction.
Already, the United States holds the title as the world’s largest producer of crude oil and the biggest exporter of LNG. And analysts at Citi said the potential for Mr Trump to seek “US energy dominance policies aimed at raising US oil, gas and power production” would contribute to lower prices of the commodity.
A major goal of Trump, according to pundits, is drive higher oil output and lower fuel prices in order to boost the American economy by reducing inflation and encouraging the Federal Reserve to lower interest rates.
Nigeria is pushing a similar economic aspiration for the petroleum industry with strong fiscal and regulatory incentives for investments in field development and production boost.
Other projections with potential to lower oil prices, according to Citi, include possible end to the war in Ukraine, production boost by OPEC members competing for market share, and de-escalation of tension between the United States and Iran which would allow for more oil exports.
In Nigeria where fuel prices are major cost trigger in the economy, it is expected that drop in the prices of petrol as more local refineries come online would contain the prevailing inflationary trends and address hunger in the country. And the pace of petrol price reduction could be enough to have a significant effect on overall inflation across the economy. It has been determined that fuel prices have knock-on effect on other prices.
The last time oil traded at below $70 for a sustained period was in early 2021, a year before Russia’s invasion of Ukraine and during the pandemic when energy was relatively low.
According to Paul Dales of Capital Economics of the United Kingdom, oil price is expected to fall to $70 by the end of 2025, then to $60 a year later.
