An energy expert, Wumi Iledare, says recent increases in petrol pump prices in Nigeria are largely driven by market expectations and fluctuations in global crude oil prices.

Mr Iledare, a Professor Emeritus of Petroleum Economics and Policy Research at Louisiana State University’s Centre for Energy Studies, said fuel prices in the short term often respond to traders’ expectations about future costs rather than current supply conditions.

Speaking on Tuesday in Lagos, he said that fuel marketers and depot operators typically adjust prices based on what they believe it will cost to replace their stock.

He said, “In the short run, market participants adjust prices based on what they expect future costs to be.

“When traders anticipate that prices may rise due to exchange-rate uncertainty, logistics costs or global crude oil volatility, they often increase pump prices defensively to avoid potential inventory losses.”

According to him, such behaviour helps explain why petrol prices sometimes rise even when policies such as the crude-for-naira arrangement between the Nigerian National Petroleum Company Ltd and the Dangote Refinery are designed to stabilise supply in the domestic market.

Mr Iledare noted, however, that over time prices usually adjust to reflect real market conditions such as crude oil supply, refining capacity, exchange-rate stability and distribution costs.

“Improved crude oil production is positive. However, in the short term, price movements may still reflect market psychology and supply-chain expectations rather than the crude-for-naira framework alone,” he added.

The energy expert also pointed to rising geopolitical tensions involving Iran as a key factor pushing global crude oil prices upward.

He stated that tensions in the Middle East had driven global crude prices up by about seven to 10 per cent within a week.

He said, “In import-dependent markets like West Africa, such shocks typically translate into a five to eight per cent increase in petrol prices because refined products quickly track movements in crude oil benchmarks.”

Mr Iledare added that Nigeria’s growing domestic refining capacity was beginning to provide some protection against global price shocks.

The expert stated, “This is where local refining demonstrates its strategic value. With the Dangote Refinery processing domestic crude, part of the global price escalation can be absorbed through logistics savings, freight elimination and smoother supply.”

He said domestic refining could reduce the impact of external price shocks by about 20 per cent.

“At least now, some of that pressure can be cushioned,” he added.

Mr Iledare also noted that rising crude oil prices could make it profitable for some marginal oil wells around the world to resume production.

He, however, said Nigeria might struggle to take full advantage of the opportunity because of persistent production challenges.

He said, “Even when price opportunities emerge, Nigeria’s production limitations prevent the country from responding as strongly as it should.”

Mr Iledare described the current situation as an opportunity for Nigeria to increase crude oil sales in naira to domestic refineries, especially as the country is not fully meeting its production quota under the Organisation of the Petroleum Exporting Countries.

According to him, supplying more crude to local refineries can help stabilise fuel supply while also supporting the naira.

“Domestic refining demand is growing, and aligning crude supply with local refining capacity can help stabilise both energy supply and the national currency,” he said.

Mr Iledare stressed that expanding local refining capacity goes beyond energy security.

He stated, “It is also about managing price volatility and ensuring that Nigeria captures more value from its natural resources within the domestic economy.”
(NAN)