Quote:
Originally Posted by Dragon123
The current price per litre of petrol in Nigeria is highly subsidised. How will they be able to make profit if they are to sell their product in the local market? Personally, I am not too keen.
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Dragon, imported fuel is subsidised because of the costs of acquiring it *(considering the $ price per barrel of crude) and transporting it to and fro. Locally refined fuel doesnt face the same problem, first of all because the dollar distortion doesnt affect it and there're no shipping costs to contend with.
*The crude produced is sold to foreign companies at about $90/barrel (presently). Now assume that it costs say $50 to produce this oil, the producers and the govt pocket $40. This crude then has to be shipped, tax paid on it in the destination country, refined, and then the resulting fuel shipped back. All these processes have associated costs which are significant thereby driving the cost of the fuel quite high - probably above N100. It is for this reason that the govt has to subsidise it - let's not debate the wisdom or stupidity of that for now.
Now, for a refinery with its own fields, the oil is extracted and sent straight to its plant at that $50 cost, no shipping, to taxes etc - well maybe with a little profit if another corporation owns the fields. This therefore makes locally refined fuel much cheaper than imported fuel and this is even moreso if the plant is an efficient one.