OPEC Production Cuts and Petrol Price
: Some members of the Organization of Petroleum Exporting Countries (OPEC) have extended their voluntary crude oil production cuts into August to stabilize international oil prices. Concerns arise that this could lead to increased petrol prices in Nigeria. Crude oil rates, which heavily influence petrol prices, have remained a significant determinant, accounting for up to 80% of the product’s cost.
Saudi Arabia’s Actions and Budget Balancing
Saudi Arabia, the de facto leader of OPEC and the world’s largest crude exporter, is reportedly dissatisfied with current oil prices. In response, Saudi Arabia, Russia, and Algeria have reduced their crude production. The International Monetary Fund (IMF) estimates that Saudi Arabia needs oil prices to reach around $80.90 per barrel to balance its budget for this year.
Implications for Nigeria
Nigeria, which recently removed subsidy payments on petrol, depends on imports due to the state of its refineries. The country is subject to market forces and the volatility of oil prices. While other factors, such as refining costs and taxes, also influence petrol prices, a rise in the international price of crude oil could lead to an increase in pump prices in Nigeria. The Nigerian National Petroleum Company Limited (NNPC) has previously stated that the country is comfortable with oil prices around $50 to maintain customer loyalty and encourage renewable energy adoption.