Do proper cost reduction exercise, you will reduce the pump price without fuel subsidy.

grandstar:


What really makes no sense whatsoever is the fuel subsidy. The subsidy has led to the underdevelopment of the downstream sector of the economy. Nobody will like to set up a refinery and sell at government mandated price. Even Dangote has informed the nation that his price will be international market going price. Because there is a subsidy. no one wants to build a refinery hence the need to import refined products

^^^
At the risk of sounding like a broken record I will repeat myself yet again. I do understand that the subsidy on imported PMS is unsustainable and has to end. I have been very clear about this. What I do not know is if there is a subsidy on locally refined PMS. In other words, if a brand new refinery is set up in Warri today, can it refine 1 litre of fuel (covering all its costs plus a reasonable margin) and sell at a price of 145 Naira?

grandstar:

I actually deleted some of what I wrote yesterday but now see it is useful

I have no idea about the exact cost of locally refined PMS. I am however confused if it will make any difference

^^^


Those who advocate the removal of subsidy on imported fuel have no problem pulling out the data to support their argument. The landing cost of imported PMS (right down to per litre basis) is available at the click of a button. Yet somehow, no one seems to have the cost profile of local refining capacity (on a per litre basis) and yet this information is central to this matter. For someone who strongly advocates subsidy removal isn't it odd that you don't have this information - and if you don't, shouldn't you be asking for it? Have you considered whether those who are pushing for full deregulation are simply interested in making supernormal profits - in an industry that has significant barriers to entry?

grandstar:

I want to ask you a simple question: why was there no subsidy on PMS when the pump price was increased to 145/litre and why is there need to now subsidize again? The answer to your question lies in how you answer that question

^^^
I am not sure what you mean up here. What I do know is that as long as the controlled pump head price of PMS (whether it is 87 Naira or 145 Naira per litre or whatever) is less than the landing cost of one litre of imported PMS then there is a subsidy. (Note that we haven't even discussed other costs yet).

We will end up going back to the point I have been making the entire length of this thread. If local refining capacity can profitably refine 1 litre of PMS for less than the current pump head price of 145 Naira then all this talk of subsidy flies out the window and we can focus on what matters: building refineries here in Nigeria to meet local demand.

And before you make an issue out of it, I do understand that the regulated pump head price of 145 Naira is not static and will have to change at some point, depending on market conditions, exchange rates, the refineries cost profiles etc. This does not in anyway negate my argument.

grandstar:

i have no idea of the cost of refining. You mentioned that affects the price. What do you mean?

Let us say it cost N10 to refine a litre of crude locally.

In 2008 the price of crude oil per barrel was close to $140. By 2009 it had crashed to $35. I want to ask you what difference will the cost of refining at N10 make to the retail pump price?

^^^
If it costs lets say N10 (all costs plus a reasonable margin) to locally refine a litre of PMS and the regulated pump head price is 87 Naira (or 145 Naira) the oil companies are still making a healthy profit. Can you see why it is important to get the truth about the cost profile of local refining capacity?

You painted a scenario of a fall in the international price of crude (from $140 to $35). Kindly note that the international price of crude oil is immaterial to the domestic market - it has zero relationship to domestic consumption as long as there is enough local refining capacity to meet local demand. I am very much aware that some believe that Nigerians should pay 'international prices' (whatever that means ) for petroleum products but that argument is nonsensical.

grandstar:

Let that pass

It isn't implied racism regarding the Scandinavians. I wouldn't say such about the Argentine's who are mostly white.

Because ARAMCO is profitable does not mean all divisions within it are. You can't be selling refined oils below the market determined price and you make a profit. Saudi sold refined oils at heavily subsidised prices until recently. I think it freed the price this year due to the collapse in oil prices since 2014. It needed to cut wasteful spending.

For it to sell refined oil below the market price it will purchase the crude oil below the market value (short changing the upstream sector of ARAMCO)in order to make a "profit". The burden was becoming too costly on the government and that's why they removed the subsidy.

^^^
I would like you to crosscheck the above about ARAMCO because you have made some very bold assertions (and not for the first time ). Details of ARAMCO's subsidy regime for Saudis would indeed be very welcome and would add a lot to this discussion.

grandstar:

Though you've come up with some impressive figures regarding Petrochina and Rosneft, I don't really trust their accounts and it doesn't change my views about state ownership. Better to err on the side of caution

^^^


You don't really trust their accounts . (Rosneft's GDRs are listed on the London Stock Exchange - although to be fair, that doesn't guarantee anything as such. Enron and Lehman Bros were once NYSE listed companies too )

Your real issue is with state ownership and that's OK. Unfortunately, that's an argument that will not be settled in your favour anytime soon - as long as some countries have state owned enterprises that comfortably meet both financial and social objectives. There's nothing, absolutely nothing that says a state owned enterprise cannot make profit or recover costs while also meeting social objectives. You may not like it but it is what it is.

grandstar:

Despite the praise you have for state owned enterprises, the private sector still beats them. STATOIL is not a big player outside Norway compared to the likes of ExxonMobil or Shell for instance. Despite ARAMCO's size, it is hard to hear of it outside Saudi Arabia. Rosneft has mostly stuck to Russia and it is not a big player outside its country. Only PetroChina has ventured outside quite visibly. Private owned companies are more daring and adventurous.

^^^
I never set out to make this a debate about the superiority of SOEs over private companies. No. You injected that into the discussion. And why should you criticize Statoil, ARAMCO etc. for concentrating on domestic markets? Is that a valid criticism? If they perform on the financial and social metrics in their home countries, why should it bother you (or anyone) if they choose not to play in export markets?

grandstar:

The fantastically corrupt Nigerian government sucks at managing SOE's and shouldn't be trusted with anything.

^^^

At least you and I are in agreement on something...

VolvoS60:


^^^
At the risk of sounding like a broken record I will repeat myself yet again. I do understand that the subsidy on imported PMS is unsustainable and has to end. I have been very clear about this. What I do not know is if there is a subsidy on locally refined PMS. In other words, if a brand new refinery is set up in Warri today, can it refine 1 litre of fuel (covering all its costs plus a reasonable margin) and sell at a price of 145 Naira?

Please try and glean things. If there was no subsidy on locally refined oil, many refineries would have been set up to make money from it. There is a subsidy.

VolvoS60:

^^^


Those who advocate the removal of subsidy on imported fuel have no problem pulling out the data to support their argument. The landing cost of imported PMS (right down to per litre basis) is available at the click of a button. Yet somehow, no one seems to have the cost profile of local refining capacity (on a per litre basis) and yet this information is central to this matter. For someone who strongly advocates subsidy removal isn't it odd that you don't have this information - and if you don't, shouldn't you be asking for it? Have you considered whether those who are pushing for full deregulation are simply interested in making supernormal profits - in an industry that has significant barriers to entry?

When they say subsidy removal, it is simply subsidy removal period! There is no distinguishing! There's nothing like local or imported oil. They are not advocating for a removal of subsidy on imported fuel but a removal of subsidies period.

I don't care a hoot about all that information because I'm a firm believer in the removal of the subsidy and the deregulation of the price. True subsidy removal means the deregulation of the price. You seem to want to have your cake and eat it too.

The information you feel I should know is completely irrelevant. My big sis many years ago took my lil brother to a swimming pool. When my sis informed my mum that they went to a swim pool, she was visibly alarmed and asked if my brother entered the water! It is close to what you're doing now.

VolvoS60:

^^^
I am not sure what you mean up here. What I do know is that as long as the controlled pump head price of PMS (whether it is 87 Naira or 145 Naira per litre or whatever) is less than the landing cost of one litre of imported PMS then there is a subsidy. (Note that we haven't even discussed other costs yet).

We will end up going back to the point I have been making the entire length of this thread. If local refining capacity can profitably refine 1 litre of PMS for less than the current pump head price of 145 Naira then all this talk of subsidy flies out the window and we can focus on what matters: building refineries here in Nigeria to meet local demand.

And before you make an issue out of it, I do understand that the regulated pump head price of 145 Naira is not static and will have to change at some point, depending on market conditions, exchange rates, the refineries cost profiles etc. This does not in anyway negate my argument.

If it was profitable to refine locally, then why is the country importing? That alone answers the question. Why are private refineries not being built? Why didn't Jonathan sell off the refineries and let them be properly turned around and be supplying the nation's fuel needs? Simply because a subsidy exist!

The only time a subsidy disappears is when the international price drops below the regulated price. This happened in 2015 when Jonathan reduced the price from 97 to 87 per litre. It also happened in 2016 when the price was fixed at 145/litre. The mistake they made was not to have deregulated the price.

Yes and it does negate your argument

VolvoS60:

^^^
If it costs lets say N10 (all costs plus a reasonable margin) to locally refine a litre of PMS and the regulated pump head price is 87 Naira (or 145 Naira) the oil companies are still making a healthy profit. Can you see why it is important to get the truth about the cost profile of local refining capacity?

You painted a scenario of a fall in the international price of crude (from $140 to $35). Kindly note that the international price of crude oil is immaterial to the domestic market - it has zero relationship to domestic consumption as long as there is enough local refining capacity to meet local demand. I am very much aware that some believe that Nigerians should pay 'international prices' (whatever that means ) for petroleum products but that argument is nonsensical.

How can the international price of crude be immaterial to the domestic market? If not, what then is the subsidy?

What determines the price of crude oil? What then determines if it is subsidised or not? If there was no international connection, why are neighbouring countries being flooded with petrol from Nigeria?

If a barrel of oil was $70 and government now decides to sell it for $40 so that petrol refined from it can be sold at N145, what is the $30 discount called? That is a subsidy of $30.

Who is best to determine the value of a factory machine that is being disposed of by a factory? A mechanical engineer or an estate agent? And if you choose any tell me why?

VolvoS60:

^^^
I would like you to crosscheck the above about ARAMCO because you have made some very bold assertions (and not for the first time ). Details of ARAMCO's subsidy regime for Saudis would indeed be very welcome and would add a lot to this discussion.

I'm not interested and anyway they have ended the program

Meantime however read this https://www.researchgate.net/publication/251560260_The_cost_of_domestic_energy_prices_to_Saudi_Arabia

VolvoS60:

^^^


You don't really trust their accounts . (Rosneft's GDRs are listed on the London Stock Exchange - although to be fair, that doesn't guarantee anything as such. Enron and Lehman Bros were once NYSE listed companies too )

Your real issue is with state ownership and that's OK. Unfortunately, that's an argument that will not be settled in your favour anytime soon - as long as some countries have state owned enterprises that comfortably meet both financial and social objectives. There's nothing, absolutely nothing that says a state owned enterprise cannot make profit or recover costs while also meeting social objectives. You may not like it but it is what it is.

Yes you're correct but why risk state owned in a country like Nigeria? I don't think America has any state owned refinery neither does Britain
My arguments is why not err on the side of caution? For a country like Nigeria state owned is a recipe for disaster. And why state owned considering resources here are stretched so thin? The federal budget is barely a third of New York City's budget, a city of only 8million people

VolvoS60:

^^^
I never set out to make this a debate about the superiority of SOEs over private companies. No. You injected that into the discussion. And why should you criticize Statoil, ARAMCO etc. for concentrating on domestic markets? Is that a valid criticism? If they perform on the financial and social metrics in their home countries, why should it bother you (or anyone) if they choose not to play in export markets?

You have a point





^^^

At least you and I are in agreement on something...
[/quote]

grandstar:

Please try and glean things. If there was no subsidy on locally refined oil, many refineries would have been set up to make money from it. There is a subsidy.

^^^
We can agree to disagree. I don't know if there is a subsidy or not. I will reserve judgment until I have the facts.

grandstar:

I don't care a hoot about all that information because I'm a firm believer in the removal of the subsidy and the deregulation of the price. The information you feel I should know is completely irrelevant.

^^^
Information is power. Always remember that.

grandstar:

If it was profitable to refine locally, then why is the country importing? That alone answers the question.

^^^
Prove it.

grandstar:

I'm not interested and anyway they have ended the program

^^^

grandstar:

Yes you're correct but why risk state owned in a country like Nigeria? I don't think America has any state owned refinery neither does Britain
My arguments is why not err on the side of caution? For a country like Nigeria state owned is a recipe for disaster. And why state owned considering resources here are stretched so thin? The federal budget is barely a third of New York City's budget, a city of only 8million people

^^^
Fair point. I agree that the Nigerian government couldn't successfully run a tap if its life depended on it. What I have a problem with is the resigned acceptance of this government ineptitude only as long as it exists in non-commercial sectors. For some reason, ideologues accept, expect or excuse government inefficiency as long as it is in non-economic sectors. If the Nigerian government cannot run a refinery, then why should you believe it can competently run an army? Or prisons? Or an education system? Or a judicial system?

And we can all agree that our army, prisons, schools etc. are broken. How come nobody suggests we privatize those areas 100%? I have long advocated this but free market ideologues do not support this - for very cynical reasons I will not go into now. Privatize all these so called 'government services' then I'll take you serious.

It has been a good exchange. I have made my points as clearly as I can. We have agreed to disagree and it has been civil.

VolvoS60:


Fair point. I agree that the Nigerian government couldn't successfully run a tap if its life depended on it. What I have a problem with is the resigned acceptance of this government ineptitude only as long as it exists in non-commercial sectors. For some reason, ideologues accept, expect or excuse government inefficiency as long as it is in non-economic sectors. If the Nigerian government cannot run a refinery, then why should you believe it can competently run an army? Or prisons? Or an education system? Or a judicial system?

Who in their right mind says that the Nigerian government has shown any competence in any of the things you mention? Are any of the Nigerian army, prison system or educational system worthy of praise? Who thinks of Nigeria's judicial system as anything other than a joke?

And we can all agree that our army, prisons, schools etc. are broken. How come nobody suggests we privatize those areas 100%? I have long advocated this but free market ideologues do not support this - for very cynical reasons I will not go into now. Privatize all these so called 'government services' then I'll take you serious.

This is nonsense from start to finish: private prisons exist and are commonplace in the USA, while a fully privatized educational system with proper oversight by a few qualified government officials would certainly be far better than the decaying mess that is in place right now. While nobody is advocating for the privatization of the entire Nigerian army (which government has ever done such a thing), private military contractors recruited through a transparent bidding process would be certain to do a better job than the army which has made such a hash of fighting Boko Haram: the only thing the Nigerian Army has ever really been good at is plotting coups, looting public funds and harassing civilians.

Your quip about "cynical reasons" only suggests that you lack the knowledge or inclination to study the issues in question in any depth, and prefer to substitute conspiracy theorising for these personal shortcomings. Every single one of the points you raise could have been easily answered with a quick google search or two.

omohayek:

Who in their right mind says that the Nigerian government has shown any competence in any of the things you mention? Are any of the Nigerian army, prison system or educational system worthy of praise? Who thinks of Nigeria's judicial system as anything other than a joke?


This is nonsense from start to finish: private prisons exist and are commonplace in the USA, while a fully privatized educational system with proper oversight by a few qualified government officials would certainly be far better than the decaying mess that is in place right now. While nobody is advocating for the privatization of the entire Nigerian army (which government has ever done such a thing), private military contractors recruited through a transparent bidding process would be certain to do a better job than the army which has made such a hash of fighting Boko Haram: the only thing the Nigerian Army has ever really been good at is plotting coups, looting public funds and harassing civilians.

Your quip about "cynical reasons" only suggests that you lack the knowledge or inclination to study the issues in question in any depth, and prefer to substitute conspiracy theorising for these personal shortcomings. Every single one of the points you raise could have been easily answered with a quick google search or two.

^^^


I don't think you took the time to actually follow the thread and my posts therein.

Read through. Slowly. Then you may contribute without the incendiary words. I want more light and less heat on this topic.

VolvoS60:


^^^


I don't think you took the time to actually follow the thread and my posts therein.

Read through. Slowly. Then you may contribute without the incendiary words. I want more light and less heat on this topic.

You really are a gifted comedian, albeit an unintentional one. You ought to take your own advice before dishing it out, lest you make yourself seem even more ridiculous than you already have.

omohayek:

You really are a gifted comedian, albeit an unintentional one. You ought to take your own advice before dishing it out, lest you make yourself seem even more ridiculous than you already have.

^^^
If you have an argument then lay it out and quit the juvenile insults. Put your argument up for debate. Anyone who actually read through the thread properly would clearly understand my position - even if they didn't agree with it.

Mudslinging and gratuitous personal attacks are not my thing. Look elsewhere if you want to do that.

VolvoS60:


^^^
If you have an argument then lay it out and quit the juvenile insults. Put your argument up for debate. Anyone who actually read through the thread properly would clearly understand my position - even if they didn't agree with it.

Mudslinging and gratuitous personal attacks are not my thing. Look elsewhere if you want to do that.

Your hypocrisy is truly astonishing in its extent. Accusing others of operating from unstated "cynical motives" isn't juvenile ad hominem in your dictionary (and paranoid to boot)? Quit kidding yourself, mate.

omohayek:

Your hypocrisy is truly astonishing in its extent. Accusing others of operating from unstated "cynical motives" isn't juvenile ad hominem in your dictionary (and paranoid to boot)? Quit kidding yourself, mate.

^^^
My, you do have a sharp tongue don't you? For argument's sake I will respond to the one area in which clarification may be necessary.

My "cynical motives" reference was to ideologues - free market ideologues to be specific. And just to be clear, my use of that term refers to the amoral world view of free market purists who all too often insist on market led solutions - even in the face of clear market failure (that's another matter altogether which deserves its own thread). My use of that term refers to the cynicism of those who recommend privatization of social services and yet balk at the idea of privatization of (for example) the armed forces - simply because that would destroy the cloak of pseudo-nationalism that national armies provide for these ideologues at the moment. I could go on and on.

Like I told you earlier, if you took the time to read the thread (instead of barging in with guns blazing) you would have understood my rhetorical question about competencies of the federal government in commercial/economic activity versus public services. But you didn't - instead you jumped in without any consideration for context or nuance - all because you felt a compelling need to call me a hypocrite, a comedian, an object of ridicule, a conspiracy theorist, a paranoiac with serious personal shortcomings etc. All in your first couple of posts! Is it that you really didn't get it? Or you did and you just wanted to troll?

Lay out your argument about the topic in as compelling a manner as you can - if you can. The gratuitous insults simply reveal you to be either uncultured or insecure. Or both. You decide.

Your appropriation of the name of Friedrich von H. (perhaps in the vain hope that his qualities would rub off on you) reveals the futility of trying to be brilliant or exceptional by association. Work on your ideas and your arguments (rather than your skill at name calling) and you wouldn't have to adopt anyone else's name for validation, OK?

ORACLE1975:
The landing cost of Premium Motor Spirit, also known as petrol, is N35 higher than the pump price of N145 per litre, the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said on Tuesday.
Kachikwu said the rise in global crude oil prices after the 2016 hike in petrol price brought back subsidy.
Recalling the experience of 2016, when the government increased petrol price from N86.5 to N145 after months of severe scarcity, he described fuel subsidy as an emotive issue.

..... into under-recovery.”
The minister noted that the government had not paid marketers all the outstanding subsidy arrears. ...

https://punchng.com/petrol-landing-cost-now-n180-per-litre-says-kachikwu/

The citizens of Nigeria have paid these marketers the subsidy money!

Would the marketers refunds us the monies for the inflated price we had to pay at the pumps each time their members hiked the price?