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The surging diesel price in Nigeria is set to become worse as Russian oil refiners have started to cut back on refinery throughput, according to the chief executive of one of the world’s largest independent commodities trading houses, Gunvor.
“This is a global problem but for Europe it’s very hard because Europe is so short” of diesel, Gunvor CEO Torbjorn Tornqvist said at the Financial Times Commodities Global Summit as carried by Bloomberg.
Trade with Russian diesel is becoming scarcer because of buyers in Europe are steering clear of Russian shipments, awaiting further sanctions against Russia over its invasion of Ukraine, or simply declining to purchase Russian energy to finance Putin’s war in Ukraine.
Nigeria for its part imports most of its refined fuels such as diesel and petrol from Europe.
The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) recently observed “with concern, the marginal increase in headline inflation (year-on-year) to 15.70 per cent in February 2022 from 15.60 per cent in January 2022, a 0.10 percentage point uptick.”
The MPC added that: “This increase was largely attributed to a rise in the core component to 14.01 per cent in February 2022 from 13.87 per cent in January 2022, while food prices moderated marginally. The rise in core inflation was mostly due to rising energy prices as a result of the current scarcity of Premium Motor Spirit (PMS), rise in the cost of Automotive Gas Oil (AGO), and hike in electricity tariff.”
The “self-sanctioning” of the buyers has already started to force Russian refiners to reduce production, according to Gunvor’s Tornqvist.
“What does that mean? It means more crude oil will need to be exported instead of the products, and we believe that is not possible and will lead to cutbacks in Russian production,” he said, as carried by Bloomberg.
Diesel stocks globally were already low even before the Russian invasion of Ukraine.
According to estimates from Reuters’ John Kemp, diesel fuel stocks in Europe are at their lowest since 2008, and 8 percent—or 35 million barrels—lower than the five-year average for this time of the year.
In the United States, the situation is graver still. There, diesel fuel inventories are 21 percent lower than the pre-pandemic five-year seasonal average, which translates into 30 million barrels.
In Singapore, a global energy trade hub, diesel fuel inventories are 4 million barrels below the seasonal five-year average from before the pandemic.
Nigeria diesel price is not regulated and have been a major source of inflation in recent times due to its use to power generators and haulage trucks.