Dangote Faults Crude Costs, FX For Petrol Price Increase To N1,400/L

The Dangote Petroleum Refinery has defended its latest fuel price increases, attributing the upward adjustments to the cost of crude oil purchased earlier and the lengthy process involved in securing, shipping, and delivering crude to the refinery.

The explanation came as the price of Premium Motor Spirit (petrol) climbed further across the country, with the product now selling between N1,310 and N1,400 per litre, depending on location.

Petrol is currently selling for about N1,310 per litre in Lagos and Ogun states, while the price has risen to N1,350 or more in northern states and other locations farther from the refinery.

The latest increase followed the Dangote refinery’s decision to raise its PMS gantry price by N65 per litre, from N1,200 to N1,265, effective August 29. It was the third increase announced by the refinery in eight days.

It was observed that the price hikes occurred even as global crude prices were declining, despite the US-Iran tensions.

However, a senior executive of the Dangote refinery, who spoke with The PUNCH on condition of anonymity because he was not authorised to speak publicly on the matter, said the prevailing international crude price could not be used as the sole basis for determining the cost of petrol being produced from crude already purchased by the refinery.

The executive explained that there was a significant time lag between when crude was purchased and when it eventually arrived at the refinery for processing.

Raising a series of questions, he said, “If you want to buy crude at today’s price, when do you think you will complete the actual transaction to purchase the crude? When will you get a laycan? When can you get a ship chartered and a charter party agreement signed? When will the ship go to load the crude and secure the laycan for discharge? When is the sailing time before the crude eventually gets into your tank?”

He also questioned how the refinery would account for large volumes of crude purchased earlier when prices were higher. “And what will happen to the huge quantities of expensive crude that you bought long ago and stored in the tanks? These are the factors determining the change in prices, not an immediate crude price change,” the source stated.

The explanation provides Dangote’s defence against criticism that its repeated petrol price increases have come despite a decline in international crude benchmarks.

The refinery first increased its gantry price from N1,165 to N1,185 per litre on August 21. Five days later, it raised the price by another N15 to N1,200 per litre, effective August 26. On Saturday, August 29, it announced another N65 increase, taking the price to N1,265 per litre.

The three adjustments have therefore raised Dangote’s gantry price by N100 per litre in eight days, representing an increase of about 8.6 per cent. The latest increase also moved the refinery’s coastal PMS price from N1,582,380 to N1,669,545 per metric tonne.

In its price communication, the refinery directed customers to return their existing Authorisations to Collect for repricing, stating that a new volume contract would be issued for immediate loading resumption.

The PUNCH reports that the impact of the latest adjustment is already being felt in the retail market, with petrol now selling at about N1,310 per litre in Lagos and Ogun and N1,350 or more in parts of the North and other distant markets.

In some locations, the product is approaching N1,400 per lliter,it was gathered. The difference in pump prices across locations is partly linked to the cost of moving petrol from the coastal refinery and depots to distant markets, with transportation and other distribution expenses adding to the cost of the product.

This is one of the reasons the Dangote refinery plans to extend its free distribution scheme across the country.

The latest increase has also raised questions over the relationship between international crude prices, the cost of refined products and the pricing decisions of domestic refiners.