Mr James Gooder, Vice President of Crude Oil at Argus Media, has highlighted the critical role of logistics and pricing factors in determining the final cost of Premium Motor Spirit (PMS), commonly known as petrol, in Nigeria.
Gooder made these remarks during a quarterly webinar and engagement with energy editors, hosted by the Major Energy Marketers Association of Nigeria (MEMAN) on Tuesday.
His presentation, titled ‘Market Trends, Transparency, and Fair Pricing’, focused on the various factors impacting petroleum prices in the Nigerian market.
Gooder emphasised the importance of jetty infrastructure, vessel capacity and exchange rate stability in shaping the pricing landscape of petroleum products in Nigeria.
He pointed out that one of the main challenges was the limited capacity of the country’s jetties to accommodate larger vessels.
“The larger your draft, the larger the vessel you can bring in.
“This allows for economies of scale, which ultimately lead to lower costs per unit of product delivered.” he explained.
However, he noted that many jetties, particularly in Warri and Calabar, are restricted to draft sizes of around five meters, which limits the size of vessels that can dock there.
He said that this constraint leads to higher logistics costs, which in turn impacts the price of petrol at the pump.
Gooder stressed that addressing these infrastructure limitations is crucial to reducing costs.
“Investing in the deepening of these drafts and improving the channels will boost business in these areas and accommodate larger vessels,” he added.
While acknowledging that major marketers have attempted to mitigate logistics challenges by sharing vessels, Gooder emphasised that this is only a partial solution.
“Structural improvements remain the long-term answer,” he said.
In addition to logistics, Gooder discussed the key factors affecting the landed cost of PMS, primarily the exchange rate and the cost of imported products.
He explained that the landed cost is calculated daily, based on the spot price of products and the prevailing exchange rate.
Gooder observed that from October to November, the exchange rate between the Naira and the dollar had remained stable.
He said that coupled with a global decline in crude oil and gasoline prices, this stability had contributed to a reduction in the landed cost of PMS.
“When the exchange rate is stable and the cost of the product decreases, both the landed cost and the pump price follow suit,” Gooder added.
He, however, cautioned against viewing these price reductions as acts of generosity by marketers.
The expert said, “It’s not about magnanimity. Prices drop because the key variables in the cost calculation are favourable.
“In addition to the exchange rate and product costs, other charges also influence the final price of PMS, including vessel charges, Nigerian Ports Authority (NPA) fees, and expenses related to the Nigerian Maritime Administration and Safety Agency (NIMASA).”
Gooder noted that vessel charges alone had decreased from 60,000 dollars to 50,000 dollars, which is a significant reduction.
However, he pointed out that other financial charges and related costs still contribute to the overall landed cost.
He said that the importance of transparency in understanding these costs was a key focus of the presentation.
“It’s not just about the product; it’s about the entire logistics chain,” he added.
Gooder urged stakeholders to appreciate the complexity behind pricing decisions.
According to him, MEMAN members use an average pricing model to promote stability in pricing.
He added that rather than purchasing products on a daily basis, they rely on a 30-day average price for products in storage.
Gooder maintained that this approach helps to moderate daily price fluctuations and provides a more predictable pricing structure.
He noted that this pricing model had been effective in mitigating the impact of volatile international markets on local pump prices.
Gooder said, “Nigeria’s exchange rate is stabilising, and crude prices are decreasing, which are positive trends for consumers.”
He explained that infrastructure investment remains a pressing issue.
“There is a need for collaboration between the government and stakeholders in the oil and gas industry to address these infrastructure challenges.
“Improving our logistics and infrastructure will not only reduce costs but also enhance energy security,” he said.
He also stressed that many of the channels to key jetties remain narrow and shallow, saying that addressing these issues would require significant investment.
Gooder emphasised that the long-term benefits far outweigh the costs. (NAN)
