IS President GoooooodLUck Jonnnnathan the Biggest Liar in The World?
WARNING! WARNING!! WARNING!!!
If you insist then get closer to you CD player set and slot in the Sound Sultan Song ( Bushmeat)
E ba mi kigbe ole ole ole,
E ba mi kigbe ole ole ole
E ba mi kigbe ole ole ole
We will all join hand to solve this simple equation. If you like you can call it prime Factor or Simple arithmetic. All na the same. There is this Professor from 9ja, his name is Dr. Izilien Agbon, a former HOD, Petroleum Engineering Department, former ASUU Chairman, University of Ibadan, trained many operators in nation’s energy industry with practical experience on our practices and policy focus in the last 20 years.
He is currently in Dallas, Texas. And his email address is izielenagbon@yahoo.com should you want to mail him to confirm whether what he wrote concerning the true state of the price of Fuel in Nigeria is true or not. The article was published by “The Will” title “THE REAL COST OF NIGERIA PETROL “on the 19/12/2011.
The Nigeria Government has been claiming that they are subsidizing the price of Petrol in Nigeria. Let Us look at the meaning of subsidy. Subsidy as the free online dictionary put it is a financial aid supplied by a government, as to industry, for reasons of public welfare, the balance of payments, etc. So Nigeria Government under President, Professor, Dr., Chief Ebele Azikiwe Goodluck Jonathan said the price would have been subsidized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon. A lay man explanation is that the government of Nigeria is saying the price for one litre of Petrol is N138 and that they are using Nigerian Money to help pay N73 per litre so that you can be paying N65 in other for you to live comfortable. Isn’t that a nice idea and a good leadership thought? For those who are not learned and can’t comprehend they would think the government has done them a big favour by using their money to balance payment for them but you know what, President, Baba, Chief, Oluwo, General Olusegun Obasanjo lied to you. Now President, Professor, Dr, Chief Ebele Azikiwe Goodluck Jonathan is lying to you again. The Professor of Petroleum, Dr. Izilien Agbon, is saying something in support of the former minister of Petroleum Resources Professor Tom David West said that there has never been anything like subsidy in Nigeria Petroleum issue. How can you tell your wife who is a food seller that the remnant of the food sales brought home for the family to eat is being subsidized by you? I am sure your wife if not kind enough will pour hot peppe into your eyes.
I am sure if you are reading this then certainly you will want to take your gun now. Calm down and cool your temper, remove that Bushmeat CD and replace with another Sound Sultan song (Mathematics). Oyinbo say na Bodmas we go te solve mathematics, o ya carry biro…..
O Ya carry your biro let us analyze this Dr. Izilien Agbon article on the Subsidy the Federal Government claimed to be existing.
Element to note on our calculation are the two countries the analysis was based upon, namely Port Harcourt, Nigeria and New York, USA;
The Rate of Dollar exchange in Nigeria which is N157;
The price of Petrol in the Mobil filling station on Old Aba Road in Port Harcourt Nigeria is N67 per litre;
The price of Petrol in the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, is $0.88 per litre. The international price;
The amount of litre in a gallon of petro is 4 litre;
One barrel is 42 gallons or 168 litres;
The crude oil exploration site is the Qua Iboe Crude Terminal in Nigeria:
The dates of the supposed purchase of the Petrol in the two location which December 10, 2011
So suppose Mrs Patience Jonathan stopped at the Mobil filling station on Old Aba Road in Port Harcourt Nigeria is N67 per litre or $1.66 per gallon
Which means 4x65= N260 for 4 litre or $1.66 per gallon
Mind you this gallon was refined from Crude oil from the Qua Iboe Crude Terminal in Nigeria. Since the government wants the subsidy remove, it means they will add the initial N73 per litre claimed to have used for the subsidy to the N65 per litre which we currently buy the petrol…
Now you will pay N138 per litre /N552 or $3.52 per gallon in the Mobil filling station on Old Aba Road in Port Harcourt as against N260 per gallon/$1.66 per gallon which we currently pay.
Then Suppose Mrs. Patience Goodluck Jonathan has traveled and arrived in US. His driver now wants to buy Petrol in Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, is $0.88 per litre or $3.52 /gallon or N552 per gallon. This US oil is also from the Qua Iboe Crude Terminal in Nigeria. The only different is that the location of where both oil were refined. Meanwhile, I will buy oil in Nigeria same price with my elder brother in US. However, my elder brother does not use generator or need travel to California by road with his car. He can do that with train or flight at an affordable price. He would not spend unnecessary time on the road due to heavy traffic or pot holes on the road neither will he get stuck at Redeem camp due to crusade non be firing his engine cause traveling at night in Nigeria as if on death row.
He does not necessarily have to go shopping; he can get on his internet and buy it online. If he earns less than $40,000 a year, he would be regarded as poor but $40,000 in Nigeria, you must be the brother to the minster or the Bank MD.
Please lower your voice, it is not yet time to jump on the road, you still need to be taught how to carry the machine Gun. So please calm down we need to carefully plan this revolution.
Let us continue our Bodmas ‘ jaare’ make we leave matter for Matthias. Dr. Izilien Agbon went further to clarify the true price of Litre of petrol in Nigeria.
“The Nigerian government has earmarked 445000 barrel per day throughout for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption”.
To get these volumes of Crude Oil at the Refinery gate from the Qua Iboe Crude Terminal we have to calculate the Development cost ($3.5/bbl) 0r N549.5/bbl with Production cost plus storage cost plus transportation cost which is $1.50/bbl or N235.5/bbl
So $3.5 or N549.5 + $1.50 or N235.5 (bbl) = $5 or N785 per barrel.
With $5 per barrel or N785 per barrel we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri.
Now let us calculate the cost 1 barrel at the Deport Gate since we now know the cost of 1 barrel at the Refinery gate.
The price of 1 barrel of petrol at the Depot gate is
1) the sum of the cost of crude oil which is $5 per barrel
2) the refining cost and the pipeline transportation cost which is $12.6 per barrel
3) The pipeline distribution cost which is $1.50 per barrel.
Cost of 1 barrel at Deport gate = $5+$12.6+$1.50=$ 17.6 per barrel (N2763.2 per barrel)
Now let us calculate the cost of the true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria.
The Distribution Margins = (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) which is = N15.49/litre or $16.58 per barrel.
So the sum of
1) Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri $5
2) Refining cost = $12.6 per barrel
3) The pipeline Distribution cost=$1.50 per barrel
4) Distribution Margins =$16.6 per barrel
$5+ $12.6+$1.50+$16.6=$35.7per barrel (N5604.9 per barrel
Now $35.7/ N5604.9 divided by 168= $0.213 per litre or N33.5 per litre….. This is the true cost of 1 litre of petrol in Nigeria but the Government sells it for N65 and yet claimed they were subsidizing the fuel. Now they want to add the ghost amount they claimed to be used as the subsidy…. So the Professor David Tom West, former Petroleum Minister who said there is nothing like subsidy is right. Why do Nigeria Government who has failed to give his people light and good road still bent on further impoverish his people by increasing the cost of Living? Why were they lying to the people? Whose purse has the extra money N31.5 accrues on each litre of petrol sold in the past goes to? If this analysis by Dr. Izilien Agbon is true then Nigerian should call for Independent investigators to investigate the subsidy Thing. They should resist this Ghost Subsidy of a thing.
Please read the original article by Dr Izilien Agbon below
On December 10, 2011, if you stopped at the Mobil filling station on Old Aba Road in Port Harcourt , you would be able to buy a litre of petrol for 65 naira or $1.66 per gallon at an exchange rate of $1/N157 and 4 litres per gallon. This is the official price. The government claims that this price would have been subsidized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon.
They are therefore determined to remove their subsidy and sell the gallon at $3.52. But, On December 10, 2011, if you stopped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refined from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from the Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nigerian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 litre of petrol in Nigeria.
We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a litre of petrol in Nigeria? The Nigerian government has earmarked 445000 barrel per day throughout for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel.
Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution costs are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria. Rather the current official prices are too high. Let us continue with some basic energy economics.
The government claims we are currently operating our refineries at 38.2% efficiency. When we refine a barrel of crude oil, we get more than just petrol. If we refine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel. This is not enough to meet internal national demand. So, we send the remaining of our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shipping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal. The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81. This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined.
Using a netback calculation method, we can easily calculate the true cost of a litre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0.306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. The net cost of swapped petroleum products would therefore be $142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per barrel of petrol or N34.45 per litre.
This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel (N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the “subsidy” is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.54 per barrel), then the take-off price of the swapped crude oil should be at international price ($107 per barrel). This is basic economic logic outside the ideological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free.
So let us conclude this basic economic exercise. If the true price of 38.2% of our petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribund refineries).
There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President should go with their economists. They should send economists and political scientists as representatives to the Senate Committee investigating the petroleum subsidy issue. There are many expert economists and political scientists in ASUU who will gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market.
The government should explain at what price the swapped crude oil was sold and where the money accruing from these sales have been kept. We have done this simple economic analysis of the Nigerian petroleum products market to show that there is no petrol subsidy what so ever. In the end, this debate on petrol subsidy and the attempt of the government to transfer wealth from the Nigerian masses to a petrol cabal will be decided in the streets. Nigerian workers, farmers, students, market women, youths, unemployed, NGO and civil society as a whole should prepare for a long harmattan season of protracted struggle. They should not just embark on 3 days strike/protests after which the government reduces the hiked petroleum prices by a few Nairas. They must embark upon in a sustainable struggle that will lead to fundamental changes. Let us remove our entire political subsidy from the government and end this petroleum products subsidy debate once and for all. It is time to bring the Arab Spring south.
** Dr. Izilien Agbon, a former HOD, Petroleum Engineering Department, former ASUU Chairman, University of Ibadan, trained many operators in nation’s energy industry with practical experience on our practices and policy focus in the last 20 years, writes from Dallas, Texas. izielenagbon@yahoo.com.
They are therefore determined to remove their subsidy and sell the gallon at $3.52. But, On December 10, 2011, if you stopped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refined from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from the Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nigerian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 litre of petrol in Nigeria.
We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a litre of petrol in Nigeria? The Nigerian government has earmarked 445000 barrel per day throughout for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel.
Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution costs are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria. Rather the current official prices are too high. Let us continue with some basic energy economics.
The government claims we are currently operating our refineries at 38.2% efficiency. When we refine a barrel of crude oil, we get more than just petrol. If we refine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel. This is not enough to meet internal national demand. So, we send the remaining of our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shipping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal. The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81. This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined.
Using a netback calculation method, we can easily calculate the true cost of a litre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0.306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. The net cost of swapped petroleum products would therefore be $142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per barrel of petrol or N34.45 per litre.
This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel (N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the “subsidy” is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.54 per barrel), then the take-off price of the swapped crude oil should be at international price ($107 per barrel). This is basic economic logic outside the ideological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free.
So let us conclude this basic economic exercise. If the true price of 38.2% of our petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribund refineries).
There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President should go with their economists. They should send economists and political scientists as representatives to the Senate Committee investigating the petroleum subsidy issue. There are many expert economists and political scientists in ASUU who will gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market.
The government should explain at what price the swapped crude oil was sold and where the money accruing from these sales have been kept. We have done this simple economic analysis of the Nigerian petroleum products market to show that there is no petrol subsidy what so ever. In the end, this debate on petrol subsidy and the attempt of the government to transfer wealth from the Nigerian masses to a petrol cabal will be decided in the streets. Nigerian workers, farmers, students, market women, youths, unemployed, NGO and civil society as a whole should prepare for a long harmattan season of protracted struggle. They should not just embark on 3 days strike/protests after which the government reduces the hiked petroleum prices by a few Nairas. They must embark upon in a sustainable struggle that will lead to fundamental changes. Let us remove our entire political subsidy from the government and end this petroleum products subsidy debate once and for all. It is time to bring the Arab Spring south.
** Dr. Izilien Agbon, a former HOD, Petroleum Engineering Department, former ASUU Chairman, University of Ibadan, trained many operators in nation’s energy industry with practical experience on our practices and policy focus in the last 20 years, writes from Dallas, Texas. izielenagbon@yahoo.com.
Are these the true Cost of Petrol? If the Nigeria government is truthful about this, then we need transparency.
ReplyDelete