In an interview with Bloomberg TV, Aliko Dangote supported Nigeria’s decision to remove its fuel subsidies, calling it a timely move in line with international trends.

He claims that it defies logic that gasoline costs in Nigeria are roughly 40% less than in Saudi Arabia, another nation that produces oil.

Noting that all other nations have done away with fuel subsidies, Aliko Dangote clarified that the Nigerian government could no longer afford the burden of subsidies.

Additionally, he revealed that the cost of fuel in Nigeria is roughly 60% less than that of its neighbouring countries.

“I think it is because all countries have actually gotten rid of subsidies. Let me give you an example: Saudi Arabia used to give what Saudis, the citizens, believe that oil is a God-given gift. So the government shouldn’t charge us for it. The government was selling it at a very low price, but today, as we speak, gasoline is about 40% cheaper in Nigeria than in Saudi Arabia, which I think doesn’t make sense. That is one. Number two: our price of gasoline is about 60% of the price of our neighbouring countries, and we have very porous borders, so it is not sustainable. The amount of subsidy that we were paying, the government cannot afford,” he said, as reported by Zawya.

“We have a choice: either when we produce, we export, or when we produce, we sell locally. But we are a private company. Yes, it is true, we have to make a profit. We built something worth USD 20 billion, so definitely, we have to make money. The removal of subsidy is totally on the government, not us. We cannot change the price, but I think the government has to give up something for something. I think, at the end of the day, the subsidy will have to go,” he added.

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Uganda is paying Vitol Bahrain USD 81.50 per tonne of super petrol, while Kenya agreed to pay USD 90 per tonne with three Gulf oil majors under a government-to-government (G-to-G) arrangement. This is based on a comparison of freight and insurance rates.

But Unoc has added more logistics costs, USD 36.92 per tonne, instead of Kenya’s USD 28.03 per tonne under the G-to-G agreement.

Furthermore, Unoc’s indicated pipeline rates are USD 57.38 per tonne, which is more than the Kenya Pipeline Company’s (KPC) charges of USD 5.93 per tonne. This begs the question of who is pocketing the money and why the pipeline prices are greater than what KPC is charging.

Uganda President Yoweri Museveni in 2023 attributed Kenya’s government-backed gasoline importation agreement’s “middlemen” to the high fuel cost in Kampala. After that, Uganda and Vitol Bahrain inked a five-year contract.

At present, the price of a litre of super petrol in Nairobi and Kampala is the same, underscoring the direct impact of Kenya’s G-to-G agreement on fuel prices in Uganda. In its examination of the pricing build-up, one of the neighbouring country’s oil marketing companies asked, “Why is Unoc’s price greater than Kenya’s government-to-government deal?”

According to the analysis, Uganda charges USD 990.29 per tonne for gasoline, USD 9.82 more than Kenya does for the same amount of fuel.

The initial diesel shipment that arrived at the Mombasa port with super gasoline has not yet had its price increased by Unoc.

Ruth Nankabirwa, Uganda’s Minister of Energy and Mineral Resources, has already issued a warning to the populace about the surprise that awaits them when the nation begins to determine pump prices by its import agreement with Vitol Bahrain.

The pipeline fees cover the cost of transporting fuel from KPC’s Mombasa facilities to the Eldoret depot, from which the cargoes of the Unoc are transported by truck to Kampala.

Uganda had claimed in 2023 that by cutting away the “middlemen” in Kenya’s G-to-G agreement, their agreement with Vitol Bahrain would guarantee reduced pump costs in Kampala. Kenya entered into agreements to deliver fuel on credit for 180 days per consignment with Saudi Aramco, Emirates National Oil Company (Enoc), and Abu Dhabi National Oil Company.

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In response to recent concerns expressed by the Confederation of Economic Associations of Mozambique during the Business Environment Monitoring Council (CMAN) meeting in Maputo, the Central Bank’s administrator, Jamal Luis Omar, recently gave the information.

President Nelson Mavimbe of the Gas Merchants Association explains the worry by pointing out that acquiring foreign money in commercial banks can be challenging at times. He also challenged the Central Bank’s decision to withdraw from the gasoline bill, which merchants were also involved in. Mavimbe also expressed dissatisfaction over the lack of a fuel margin review over five years.

The purpose of Decree 89/2019, which defines fuel margins, is to guarantee a sufficient return on investment in the company to pay interest rates and other expenses.

“Our operational expenses are steadily rising, resulting in an unsustainable state,” Mavimbe stated.

In response to enquiries about the scarcity of foreign currency in commercial banks and the Bank of Mozambique’s decision to stop participating in the gasoline rate, Jamal Luis Omar notes that the Mozambican foreign exchange market is steady, and exports and conversion rates are both continuing as usual.

He clarified, “This policy aims to ensure that commercial banks have liquidity or foreign currency to serve their clients in export operations. Up to 30% of export earnings must be converted in commercial banks.”

Furthermore, he stressed that statistics on exchange rates indicate degrees of stability.

“Based on our analysis, we do not perceive a global disruption issue; nonetheless, we have learned of challenges faced by domestic business owners in obtaining foreign exchange through commercial banks,” Jamal Luis Omar acknowledged.

He said that to determine the root of this issue, the bank is closely examining it. One thing he can guarantee is that the bank will act swiftly to maintain exchange rate stability in the event of any disruptions or widespread shortages of foreign currency.

Omar provided information regarding the fuel bill’s introduction in 2005, stating that the measure was necessary as a temporary fix as the nation’s economy matured due to export issues.

“The Bank of Mozambique’s decision to withdraw from the gasoline bill was a carefully thought-out and well-researched action, taken at a time when our economy matured in terms of exports, and the banks were appropriately informed about the withdrawal from this process,” Jamal Luis Omar concluded.

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Even though paying less for gas may be beneficial, the market impact goes beyond just decreased consumer pricing. The global economy is affected in a rippling manner by changes in oil prices. One of the biggest casualties is the oil industry itself. The stakeholders’ profit margins go down significantly as they sell their products for less money, resulting in job losses, output decrease or possibly bankruptcy. It encompasses both the oil companies and the countries whose economies heavily rely on oil exports.

In response to the failure of two prestigious American banks, Silicon Valley Bank and Signature Bank, oil prices fell in the first quarter of 2023. Investors are in a difficult position too. The fear about the impact of this banking sector crisis spreading to the wider financial sector caused hefty projections for oil demand to be quashed. Analysts are now cautioning that the oil market will be “locked in a surplus for most of the first half of the year” because of persistent “contagion” risks brought on by the turmoil in the banking sector.

The US inflation rate, since 2022, reached its highest level in 40 years as a result of the sanctions placed on Moscow amid the Ukraine war. To combat this, the Federal Reserve increased interest rates to their highest level since 2007. Although the inflation has come down below 4%, there are talks around further rate increases, even though some have projected that the banking crisis would likely end shortly and that the oil price would rebound too. The impact of the interest rate rises is also difficult to forecast and may continue to draw attention to specific financial market segments as well as vulnerabilities brought on by excessive debt and stretched asset valuations.

Low oil prices may be tough for nations that export it, but the phenomenon will be manageable, according to a WEF analysis, because “with price changes, there is a shift in profiting between oil-producing and oil-consuming countries.”

To mitigate the effects on their economies, oil exporting nations will go for options like reducing government spending, boosting taxes, ending subsidies, and implementing measures to tighten the financial system like hiking interest rates.

In addition, the US CPI has significantly grown, placing stress on the economy at a time when the Federal Reserve is already grappling with inflation among banking issues. If the Federal Reserve lowers interest and inflation rates, the oil market may recover. However, it appears that the market is currently either bracing for a future recession or that one or more funds are being forced to raise cash and reduce risk on their books as a result of worries about liquidity in the wake of bank collapses.

Tracing the ‘hope’

Large investors like Warren Buffet, who boosted his investment in the oil business Occidental Petroleum. are drawn to lower oil prices. Buffett’s company Berkshire Hathaway now owns a 22.2% stake in the corporation as a result of the most recent acquisitions. It has purchased more than 200 million shares worth $12.2 billion. The Chinese market will likely be the source of demand in 2023.

China is the world’s largest consumer of oil, therefore an increase in Chinese demand might help oil prices. The International Energy Agency (IEA) predicted a two million barrel daily rise in oil demand by 2023. The IEA Executive Director asserted that “With the Chinese economy now recovering, it will have major implications for oil and gas market balances.” The OECD has also increased its projection for world economic growth by 0.2% points, from 2.2% in November to 2.6% this year and 2.9% in 2024.

China’s recovery

Despite the upward revision of growth projections, the OECD issued a warning that the recovery is still fragile and that the risks are still disproportionately to the downside. According to customs statistics, China’s crude oil imports dropped 18.8% to the lowest daily rate since January in July 2023 as major exporters reduced their international exports and domestic reserves kept growing.

The largest oil importer in the world imported 10.29 million barrels per day (bpd) of crude in July, according to figures from the General Administration of Customs.

The second-highest import volume on record was reached in June at 12.67 million bpd.

However, despite China’s economy being severely impacted by widespread COVID outbreaks and massive lockdowns a year earlier, oil imports were 17% greater than the 8.79 million bpd brought in at that time.

Some 325.8 million metric tons of crude were imported during the first seven months of the year, an increase of 12.4% from the same time in 2022.

“The (month-on-month) decline was led by lower imports from the big-3 crude exporters, namely the U.S., Saudi Arabia, and Russia, which have cut exports amid reduced production targets and/or higher domestic demand,” said Emma Li, a China crude oil analyst at Vortexa in Singapore.

Li pointed out that at the end of July, China’s onshore crude oil inventories were over 1.02 billion barrels, and that the steady increase in those stockpiles would enable Chinese refiners to reduce their imports in the months to come.

Despite the overall decrease in imports, data from consultancy Zhuochuang showed that state-owned refineries increased their processing rates in July to an average of 78%–82%, up 2-3% points from June.

The need for summer travel had been predicted to increase gasoline usage.

According to data from the Longzhong consultancy, domestic diesel inventories increased by around 2% while domestic gasoline inventories decreased by about 3% between mid-June and mid-July as sluggish export volumes and a downturn in the real estate industry continued to dampen demand.

Chinese oil product exports increased in July as a result of better fuel profit margins in Asia, which also supported higher processing rates.

Exports of refined petroleum increased in July 2023 from 4.51 million metric tons the month before by 55.8% to 5.31 million metric tons.

Some 10.31 million metric tons of natural gas were imported into China in July, an increase of 18.5% from 8.7 million a year earlier when importers reduced spot purchases due to high liquefied natural gas prices around the world.

In conclusion, the oil market is currently facing a complex web of factors that are influencing its dynamics.

The impact of the price fluctuations extends beyond the pump. Many oil businesses, especially those heavily reliant on higher oil prices, are grappling with reduced profits, potential job losses, decreased output, and even the threat of bankruptcy. The banking crisis and uncertainty in the financial sector have further exacerbated the situation, leading to cautious projections for oil demand and market surplus.

The broader economy is also feeling the effects, with the US Federal Reserve raising interest rates to counterbalance inflation. This move, however, brings its own set of uncertainties and potential repercussions, including impacts on specific financial segments and vulnerabilities arising from debt and asset valuations.

Amid the challenges, there are glimmers of hope. Key investors like Warren Buffet see opportunity in lower oil prices, and the recovery of the Chinese economy, as the world’s largest oil consumer, holds promise for increased oil demand. The International Energy Agency’s projection of a rise in oil demand by 2023, driven by China’s recovery, suggests a potential positive shift in the market.

However, caution remains. The recovery is still fragile, as evidenced by China’s cautious oil import trends and the ongoing risks associated with the pandemic. The world economy’s growth projections have been revised upwards, yet the OECD emphasises that the downside risks remain significant.

In this intricate landscape, the oil market’s future trajectory remains uncertain. It will likely depend on a delicate balance between geopolitical events, economic recovery, investor sentiment, and government policies. While challenges persist, the interplay of various factors also presents opportunities for adaptation, innovation, and growth across industries and economies.

Despite all the encouraging indicators, there is still a lot of uncertainty over the future of the oil industry, the recovery of China, the implications of the ongoing Ukraine conflict, and the geopolitical environment as a whole. It’s a waiting game, at least for the moment.

The post Navigating the ‘oil’ uncertainty appeared first on International Finance.

Fuel cards are an all-inclusive solution that can help you manage your fuel costs and reduce operating costs by 30%.

You can track and regulate how much your drivers spend on gas, thus restricting fraud and overspending. You can even use the card to obtain gasoline rebates and extra benefits on your fuel purchases.

Like a credit card, a fuel card is used only to buy gas. Your driver must enter the card and fill the tank before giving the final information. This is the most effective method for streamlining fuel management, reporting, and billing.

You now understand how gasoline cards can reduce costs, enhance management controls, and simplify administrative procedures. Let’s go over them in greater depth below:

At the networking fueling stations, the fuel cards provide particular discounts. It offers you price breaks on your purchases. Some vendors even provide volume-based rebates to help you save more money.

These cards also provide special offers and savings on additional services. Some even offer loyalty awards.

The card also allows you to keep an eye on your spending. For example, do you realize that drivers may occasionally overspend? There are four possible outcomes:

• Using a hose or other equipment, drivers siphon fuel from the tank to use it to their advantage
• Misuse: The company’s credit card can be used by the drivers to pay for gas for their cars
• Slippage: The motorists spend the fuel money on snacks, beverages, or other sundries
• Overfilling occurs when the driver overfills the fuel tank of the car

These are some significant issues that the fleet industry is now dealing with. By switching to gasoline cards, you can address issues.

You can regulate access spending, individual employee limits, purchasing limits, and more. It also gives your driver a unique driver ID number, preventing them from using the card in an unapproved manner. You will be notified each time your driver purchases with the specifics.

A gasoline card also offers comprehensive data on fuel expenditures, allowing you to analyze spending to spot any abuse or establish personal spending caps.

Fleet managers can produce statistics to track their speeding. It saves time compared to manually creating expense reports. You can also use them to get exact information about how much fuel and maintenance costs for each vehicle in your fleet.

You can also obtain a summary of the expenses incurred by your fleet. This can be used to plan your budget and manage fleet-related costs.

You will be informed of the location in real-time when your driver makes a purchase. You may also look up the truck’s specifics to ensure they are not using the card for their personal vehicle.

Whenever you buy fuel, a fuel card with odometer logs the distance traveled. As a result, you may ensure the driver is taking the prescribed route and abstaining from reckless driving practices that raise fuel costs.

Additionally, it offers better details on the typical distance and whether maintenance is required. Therefore, you can utilize the knowledge to select the best delivery route at the following time.

The fuel card comes with a mobile application that the drivers may use to compare the cost of petrol at various filling stations. They can pick the one with the best offer.

If there is a need for fuel on an unfamiliar route, they can help find fuelling stations.

Fuel Cost
Fixed and pump prices are the two main pricing structures offered by the gasoline cards.

The fuel cost is fixed and volatility-proof. Therefore, it is perfect for large companies because they need to purchase a lot of gasoline to run their operations.

On the other hand, pump-price fuel cards provide you with savings, loyalty benefits, etc. For small and medium-sized fleets, it works best.

The best part is that there are other advantages as well. For example, you’ll also receive exclusive offers and perks on each fuel transaction.

To get rid of worries related to the fuel price hike, start using fuel cards. It’s the ultimate solution for both cost-effective gasoline purchases and fraud prevention.

Vikas Kapoor

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Mele Kyari, head of the Nigerian National Petroleum Corporation (NNPC) told the media that both companies’ investments will cover Nigeria’s upstream, midstream, and downstream sectors.

According to S&P Global, Adnoc and NNPC will meet this week to discuss investment opportunities across upstream, midstream and downstream sectors in the country. However, the midstream opportunities could also include greenfield projects. 

Aramco is in talks with NNPC to supply gasoline to West Africa—and make investments in Nigeria’s energy sector. Kyari said that Aramco is “quite keen on getting the opportunity to supply gasoline to West Africa and we will provide them with the right platform.” 

Both parties will hold discussions in October during an investment conference in the Kingdom of Saudi Arabia. NNPC is the largest importer of gasoline in West Africa.  

Nigeria’s state oil corporations are seeking more investments, particularly in the midstream sector such as pipelines and refining. The country has outlined a target to pump as much as 4 million barrels per day over a period of six years. Analysts believe that the target is too ambitious to achieve. 

Earlier this year, Nigeria and the Kingdom of Saudi Arabia’s oil and energy minister met to discuss the potential opportunities for development in the oil sector. Also, Saudi Aramco’s presence in Sub-Saharan Africa will benefit its global investments. 

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According to former Prime Minister of Egypt Sherif Ismail, the agreement clearly states that Egypt is expected to pay Aramco within a year’s period of time. The signed agreement between both companies will begin in September.

The oil products in accordance with the deal include 50,000 tonnes of diesel fuel, 220,000 tonnes of heating oil and 150,000 tonnes of gasoline per month.

Last year, the Egyptian Petroleum Ministry, said in a statement, “It was agreed that the Saudi Arabian side would resume Aramco’s shipping of oil products as per the commercial contract signed between the Egyptian General Petroleum Corporation and Aramco.”

Based in Dhahran, Saudi Aramco is a national petroleum and natural gas company with a market value estimated at US$2tn.

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