DIAGNOSTICS OF THE CURRENT FUEL (PMS) SCARCITY IN NIGERIA
Christmas is around the corner. The demand for PMS is usually high during this period because many Nigerians will be traveling for the celebration.
Up until yesterday, the 5th of December 2017, any customer who goes to buy PMS at any filling station would spend less than 10 minutes before leaving with his tank filled with the product.
In less than 24 hours; the situation in some filling stations across the country changed. Queues started building up, some other filling stations were outrightly shut. What is happening? What could have happened overnight? How come the product suddenly became scarce? These are some of the questions motorists are asking.
1. According to the GMD of NNPC, a rumour about impending increase in oil price has been making the rounds in the country in recent times. This has led to panic buying by motorists, which further led to excessive demand in some parts of the country. This has resulted in theshortage of PMS to meet the excessive demand caused by panic buying. In other words, it has created a huge gap between demand and supply of PMS.
2. Independent marketers are taking advantage of the situation to hoard the little available PMS in their storage tanks with the aim of further increasing the gap between demand and supply of PMS. This, they know, would lead to an astronomical rise in the price of the product, so that they can make abnormal profits. This situation in economics can be found under the The Principle of Demand.
THE LAW OF DEMAND
The law of demand states that “the higher the price, the higher the quantity demanded…” But in this case, the marketers have adopted “the higher the demand, the higher the price. And the higher the price; the higher the profits” principle.
This principle is similar to the strategy adopted by OPEC and some non-OPEC countries in recent times. They signed an Agreement on Output Cut that created an artificial scarcity in the global crude oil market. Their aim was to increase the price of crude oil. It has started yielding positive results because, as at November 29th 2017, Brent Crude oil price has moved up to $63.11 per barrel (nnpcgroup.com, 2017). I’m sure Nigerians are happy about this.
1. Nigerians should stop panic buying of PMS because according to the GMD of NNPC there is sufficient product to meet the increasing demand (nnpcgroup.com, published on energymixreport.com).
2. NNPC said that there is no plan to increase fuel price. The ex depot price still stands at N133.38 per litre while the pump price still remains N143/N145 per litre. So, stop panic buying.
3. The government should identify the “cabals” heading the associations acting as a cartel in Nigeria’s downstream oil sector and deal (negotiate) with them in a diplomatic way.
Energy Analyst, Afimia Consulting Services.