VolvoS60:


^^^

I challenge you to prove this.

I will spare you the long details. Various operator companies are cutting their budgets and the one I work for would be cutting their budget by a whopping 40%!. Iwotago? I hope you understand why they are doing that? They can't make any profit at $65 per barrel. The break-even cost of oil as at today stands at between $70 - $80 per barrel. Oil companies simply can't make new investments. Forget the rubbish oil lifting and finding costs that are being bandied around, the averge break-even cost of the cheaper oil shale production still stands at around $67 per barrel! Though prices vary from region to region.

Obiagelli:

Well said, the fall of the naira have cancelled our gains but we might have to do more calculations,

how many litres do they get from a barrel of crude.

Is 30 nairs increase on the dollar enough to cancel out $40 saving on falling crude? I don't think so.

CC. Jmaine, Barcarnista, CFCfan, BlackTechnology datolee.

Subsidy should be removed completely


Fashola is wrong . His view reinforces subsidy .

Obiagelli:

You have no idea what you are talking about, did you say shale oil is cheap?

Yes, it is considered cheaper especially with small scale producers. You don't need the best rigs to get oil out from it.

Bayswater:


Yes, it is considered cheaper especially with small scale producers. You don't need the best rigs to get oil out from it.

This is strange to me.

BlackTechnology:





Subsidy should be removed completely


Fashola is wrong . His view reinforces subsidy .

How does the average man benefit from subsidy removal?

Bayswater:
That's Fashola playing to the gallery again saying rubbish under the pretence of not being an economist. He has economic advisers, he could have sought their advise before displaying his hypocrisy. That a barrel of oil is now $65 does not mean the cost of producing it or bringing it to the pump will change. Pump price has not been reduced in the UK, usa and across Europe. His attempt at using a bushmeat seller's logic has failed woefully.

Even if we refine the crude oil here, the cost if producing a barrel of oil would still be more than $65 per barrel. Even the average cost of producing the shale which people consider cheaper, is above $70 per barrel. As long as we don't refine crude here, it would take months for us to see reduction in pump prices.

Our greedy oil marketers too will not allow us feel the positive impact even when they start getting oil at reduced prices, they would want to maximise their profit.

You are the one saying rubbish. US, Britain and Europe are seeing the lowest pump prices in four years. It has been reduced and it's not bushmeat seller's logic. It's common sense logic.

Lmao... People consider shale cheaper? What country are you from?

The only point on which we are in agreement is the greedy oil marketers.

Obiagelli:

This is strange to me.

Saudi thinks oil shale producers can be priced out at $65 per barrel. What does that imply?

jmaine:


Thank you . . . . . . . .

Bros in any case, the price is still supposed to drop because the naira did not fall as much as the price of crude oil.
However, I believe what will drop is the amount spent in subsidizing those products rather than the price of the products.

revolt:
oga whoever is importing diesel will not reduce his price, cos it profitable. If we were refining then wed hve a case but infact, its even more expensive to import now with devaluation of naira. The subsidy must go

Who determines the price of the subsidy bill? Is it the marketer or the price of production in the market? What constitute production price? Who determines what is to be paid by consumers after what is due for subsidy has been paid? Definitely, you like most people on this thread(especially jonathanians) have no idea of the subjject. You just post because you have mb

Obiagelli:

How does the average man benefit from subsidy removal?

Instead of subsidising fuel, we should invest subsidy money(#800b) into establishing a Small or Medium scale factory size that can be expanded with time.
1) Agriculture/ process agriculture
2) Mining/ process minerals
3) Electrical industry
4) Electronic industry
5) Tools industry
6) Mechanical industry
7) Petrochemical industry
Chemical industry.


They can invest #100b in each for 10yrs after which they privatized the businesses.


#100b × 10yrs = #1trillion invested in each industry for ten years

Obiagelli:

How does the average man benefit from subsidy removal?

With the present situation, the subsidy is not a bad idea, the problem is sincerity of government. The corruption, fiscal indiscipline, executive rascality and poor fiscal policies of the government are the problem of this country. If these can be achieved, there will be no need for the subsidy as the people will be benefiting a lot from the system, then see the subsidy as unnecessary. As for now, the subsidy is going nowhere

I think the answer to Fashola's question lies in the fact that the FG has decided to drastically cut the amount spent on subsidy.
I was explaining that to people in the thread below that the cut in amount spent on subsidy won't result in an increase in prices of petroleum products as they feared.
www.nairaland.com/2007926/president-seeks-cut-fuel-subsidies

Collynzo9:

Bros in any case, the price is still supposed to drop because the naira did not fall as much as the price of crude oil.
However, I believe what will drop is the amount spent in subsidizing those products rather than the price of the products.

Gbam


It is the subsidy amount spent that should drop and not the price of petrol.


Obiagelli


This is where Fashola mixed things up.

BlackTechnology:



Gbam


It is the subsidy amount spent that should drop and not the price of petrol.


Obiagelli

And that is what is happening.
www.nairaland.com/2007926/president-seeks-cut-fuel-subsidies

Collynzo9:

Bros in any case, the price is still supposed to drop because the naira did not fall as much as the price of crude oil.
However, I believe what will drop is the amount spent in subsidizing those products rather than the price of the products.

You do have a solid point, but I did like to know the current cost of landing refined crude in the country.

In 2012, N123:00 was quoted as the landing cost aside all sundry charges afterward.

BlackTechnology:



Gbam


It is the subsidy amount spent that should drop and not the price of petrol.


Obiagelli


This is where Fashola mixed things up.

You mean the government is making money off Nigerians and they are yet to publicly declare it? Don't forget that subsidy money is budgeted.

Crocz:
He absolutely right....Nigerians are just insensitive to situations like this, we should be buying petrol less now


But the government can't afford to do that cos the revenue will go down low even more...so when people protest it, they'll just say they are implementing full subsidy removal and in the end, it won't matter

It's exactly what I was discussing with a neighbour this morning. This goes a long way to show how insensitive and heartless our government is.

barcanista:
With the present situation, the subsidy is not a bad idea, the problem is sincerity of government. The corruption, fiscal indiscipline, executive rascality and poor fiscal policies of the government are the problem of this country. If these can be achieved, there will be no need for the subsidy as the people will be benefiting a lot from the system, then see the subsidy as unnecessary. As for now, the subsidy is going nowhere

Separate economics from politics

The most dangerous fans are those who supports you when you are wrong


Barcanista

Fashola got this wrong


Amount spent reduces but price remains the same.

barcanista:
With the present situation, the subsidy is not a bad idea, the problem is sincerity of government. The corruption, fiscal indiscipline, executive rascality and poor fiscal policies of the government are the problem of this country. If these can be achieved, there will be no need for the subsidy as the people will be benefiting a lot from the system, then see the subsidy as unnecessary. As for now, the subsidy is going nowhere

Expecially with the fact that fuel prices drive the local economy, it drives production and services. If we had constant electricity, we will be less dependent on fuel.

leaves this thread

Obiagelli:


You mean the government is making money off Nigerians and they are yet to publicly declare it? Don't forget that subsidy money is budgeted.

Subsidy means you pay a fraction of the real cost.

Eg a car cost 100naira and I promise to pay 30naira for you. How much will you pay .? 70naira

Now if the price of the car reduces to 80naira, how much will I pay for you.? 10naira.


So in essense govt will spend less on subsidy

BlackTechnology:



Instead of subsidising fuel, we should invest subsidy money(#800b) into establishing a Small or Medium scale factory size that can be expanded with time.
1) Agriculture/ process agriculture
2) Mining/ process minerals
3) Electrical industry
4) Electronic industry
5) Tools industry
6) Mechanical industry
7) Petrochemical industry
Chemical industry.


They can invest #100b in each for 10yrs after which they privatized the businesses.


#100b × 10yrs = #1trillion invested in each industry for ten years

Please don't make me laugh, how has the cuts in subsidy overtime help those sectors you mentioned?


We were talking about inflation and its effects on interest rates in the other thread. Do you know that increase in fuel pump price increase inflation and in turn increases interest rates?

Fuel drives our local economy because it account for about the highest expenditure in both small and large businesses. Fuel is the major source of power.

BlackTechnology:



Separate economics from politics

The most dangerous fans are those who supports you when you are wrong


Barcanista

Fashola got this wrong


Amount spent reduces but price remains the same.

what do you mean separate politics? What is political in what I posted? you obviously have no clue on that, I will let it slide. As for Fashola, he is 500% on point.

barcanista:
What iis the %Change in the Price of the Dollar and what is the %Change in the price of crude oil? My friend this is a very simple economics.
At price $100 per barrel, government spends 1trillion on subsidy bills. Naira/Dollar was N165.
At price $70 per barrel, government cannot justify spending the same 1 trillion on subsidy bills, despite the devalue of the naira to 178 per dollar. The %Change can never justify it.
We have 30% reduction in the price of the crude oil, with a 8% increament in the price of the dollar. The disparity is just glaring. The price of petrol must go down or the appropriation on subsidy must go down should the price of petrol remain constant.

Obiagelli:

Please don't make me laugh, how has the cuts in subsidy overtime help those sectors you mentioned?


We were talking about inflation and its effects on interest rates in the other thread. Do you know that increase in fuel pump price increase inflation and in turn increases interest rates?

Fuel drives our local economy because it account for about the highest expenditure in both small and large businesses. Fuel is the major source of power.

I just explained to you using an example that government will spend less on subsidy but price remains the same

BlackTechnology:

Subsidy means you pay a fraction of the real cost.
Eg a car cost 100naira and I promise to pay 30naira for you. How much will you pay .? 70naira
Now if the price of the car reduces to 80naira, how much will I pay for you.? 10naira.
So in essense govt will spend less on subsidy

BlackTechnology:


Subsidy means you pay a fraction of the real cost.

Eg a car cost 100naira and I promise to pay 30naira for you. How much will you pay .? 70naira

Now if the price of the car reduces to 80naira, how much will I pay for you.? 10naira.


So in essense govt will spend less on subsidy

No i should pay 50 because you are bound by law (budget) to pay me 30 naira except you are going to return the 20 naira in dispute back to Nigeria.

barcanista:
what do you mean separate politics? What is political in what I posted? you obviously have no clue on that, I will let it slide. As for Fashola, he is 500% on point.

This below is what Fashola missed.

BlackTechnology:

Subsidy means you pay a fraction of the real cost.
Eg a car cost 100naira and I promise to pay 30naira for you. How much will you pay .? 70naira
Now if the price of the car reduces to 80naira, how much will I pay for you.? 10naira.
So in essense govt will spend less on subsidy

Asiwaju9ja:


We have been advocating for local content in d oil industry, does this not include refining our crude oil locally? What Fashola said is 100% correct. I am an economist and I tell you that a marginal increase/decrease in any variable factor involved in determining d price must reflect on d actual price, no matter how minimal. Now, to the fall of the value or exchange rate of the dollar. I tell you this have been put into consideration in all international biz. They give clearances for what is called MFD(Marginal Fluctuation Difference) I do not need to explain this. But for d sake of the lay man( if u consider urself such) the upward and downward movt of the dollar in d int. Market, allowances are given for these unforeseen price changes in exchange rates. I hope with this point of mine, I have been able to convince you and not confuse you on the value of the naira matter?

I laugh at some TANoids and Jonathanians who have become Economist guru arguing and justifying the position of government without recourse to all the variable factors. To them, the FG have no need to reduce the pump price neither is there a need to reduce the cost of the subsidy without affecting the subsidy itself.

Did you know that ghana that also imports refined crude reduced their own pump price

jmaine:


Thank you . . . . . . . .

chemali:


You are the one saying rubbish. US, Britain and Europe are seeing the lowest pump prices in four years. It has been reduced and it's not bushmeat seller's logic. It's common sense logic.

Lmao... People consider shale cheaper? What country are you from?

The only point on which we are in agreement is the greedy oil marketers.

Are you kidding me? What lowest pump/price reduction in Europe and usa are you talking about? FYI, taking Britain as an example petrol was sold at around 120p (£1.20/ N330 approx) per litre, it now cost around 118p per litre! That's a reduction of 2 effin pence per litre. What difference does that make? Is that what you called reduction? C'mon let's be reasonable here.

Coming to the cost of oil production from shale formations, small scale producers based in the shale sweet spots of the usa can even produce a barrel of oil for as low as $35 per barrel ( how cheap can it get) and in other areas it is produced at about $67 - $70 per barrel which us still cheaper than the break-even price of producing crude oil in most places in the usa.

Bayswater:
That's Fashola playing to the gallery again saying rubbish under the pretence of not being an economist. He has economic advisers, he could have sought their advise before displaying his hypocrisy. That a barrel of oil is now $65 does not mean the cost of producing it or bringing it to the pump will change. Pump price has not been reduced in the UK, usa and across Europe. His attempt at using a bushmeat seller's
Our greedy oil marketers too will not allow us feel the positive impact even when they start getting oil at reduced prices, they would want to maximise their profit.

Good explanation, i quite agree with you, but what stops us from refining the crude here? Can we still afford to continue dashing other countries our scarce forex when we can easily refine the crude here?

Obiagelli:


No i should pay 50 because you are bound by law (budget) to pay me 30 naira except you are going to return the 20 naira in dispute back to Nigeria.

The 20 naira that you insist must be returned is what the government wants to return.


That's why people like me are saying invest it into other productive sectors like agriculture and industries.

BlackTechnology:


The 20 naira that you insist must be returned is what the government wants to return.


That's why people like me are saying invest it into other productive sectors like agriculture and industries.

They are yet to return it since October, can you tell me what is going on.


And i ask again, the previous subsidy cuts, how has it helped industry and agriculture?