By Clara Nwachukwu
LAST week, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, ordered the oil and gas industry regulator, Department of Petroleum Resources, DPR, and the Nigerian National Petroleum Corporation, NNPC, to crash the price of kerosene in a few days.

Kerosene, a product that is regulated at N50 per litre, however, sells for between N100 and N150 per litre, depending on the area and outlet. The poor Nigerians spend days at the NNPC retail outlets queuing for the scarce commodity because it is the only place where it is sold at the control price.

Other outlets either operated under the major or independent oil marketers, simply sell at whatever profit margin they have allotted to themselves at that particular point in time.

Such pronouncements were popular right from the reign of former President Olusegun Obasanjo, who then feigned ignorance of the high cost of kerosene, and ordered the product price should be permanently regulated at N50/L.

At a point, it was argued that marketers were diverting kerosene to the aviation sector, to make higher gains. This is because kerosene has dual purpose, DPK, and comes as either household kerosene, HHK, used for domestic energy, or as aviation turbine kerosene, ATK, or aviation fuel, popularly called Jet-A1.

The long queue for expensive and unavailable kerosine...but when will this scarcitystop?

But the statistics below from the official website of the Petroleum Products Pricing Regulatory Agency, PPPRA, show that this argument can no longer hold water, as it is more profitable in view of the attendant margins to sell the product as HHK than as ATK :

May 18, PPPRA Pricing Template (N)      HHK           ATK
Landing Cost
143.94             144.41
ExpectedPrice
157.14           153.91
Margins
13.20                       9.50

For the minister, crashing the pump price of kerosene is a direct intervention to alleviate the sufferings of the masses in accessing the scarce commodity, which they use for domestic energy needs, particularly cooking and lighting of lanterns, due the prevalent electricity supply shortages.

However, analysts are not convinced the recent directives would yield much gains or benefits, as similar orders in the past yielded little or no results, because they were mere political pronouncements that were not backed by the political will to execute them. If anything, such orders only helped to make the commodity scarcer and more expensive.

Acknowledging that the “price of kerosene has increased so much in recent weeks,” the minister directed that the DPR to “put in place strong control mechanisms to arrest the situation.”

But at the same time, she admitted that “it is very hard to control exactly how they price these products.”

According to her, “We can control the price in our own stations, unfortunately, we don’t yet have the spread that we will like to have and we’re working on that as well. But this becomes more difficult in a free market economy, trying to control the cost of the price that retailers sell the products. But we are working at ways and means to deal with that.”

The minister blamed the scarcity and high cost of kerosene on marketers, who are profiteering from the situation at the expense of the people. She noted that the NNPC, through its subsidiary, the Pipelines and Products Marketing Company, PPMC, have sufficient product to meet national demand at regulated, adding: “Our investigation shows that kerosene has, however, become scarce and selling at high price due to distribution problems caused by middlemen who have made it their vocation to profiteer from the product.”

As a way out, the minister charged the managements of the NNPC and the DPR to bring to an end the ugly situation within the next few days.

Under the arrangement the NNPC through its subsidiary, PPMC, will ensure that products are loaded out from the three refineries and the coastal jetties to all the nooks and cranny of the country while DPR has the mandate to activate compliance measures and all necessary control strategies to squelch the incidents of arbitrary pricing and sharp practices.

Already the corporation has swung into action by increasing the volume of HHK allocation from eight million litres to record 12million litres per day to guarantee that the country is wet with kerosene. The 12 million litres is in excess of the national consumption level, which it put at about 10million litres per day.

Elaborating further, the Group Managing Director of the NNPC, Mr. Austen Oniwon, said the corporation supplies kerosene to marketers at N40/L, adding that apart from increasing the daily volume of kerosene in the market, the NNPC/PPMC has put in place a special Monitoring Committee on kerosene distribution.

Operation of the task force

Managing Director of the PPMC, Prince Haruna Momoh, speaking on the operation of the task force, said members of the committee traversed the length and breadth of the nation tracking the movement of kerosene from the refineries and coastal depots from the point of discharge through the tank farms.

But oil marketers who spoke to Vanguard in confidence described the minister’s and NNPC’s accusations as “unfair.” Calling their bluff, the marketers challenged the NNPC to publish the names of marketers that were supplied with kerosene in the last two years.

One of the major marketers revealed: “Each major marketer cumulatively, got only two million litres or 60 trucks of 33,000 litres of kerosene from the NNPC in the last two years. So who are they supplying the kerosene to?”

Indeed, the issue with the high cost of kerosene is beyond just pricing, as infrastructure challenges such as storage facilities including tank farms, depots as well transportation through damaged pipelines or by road, all combine to add to the high cost of the product. Until these infrastructure deficiencies are corrected, directives may continue to go unimplemented.