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There are strong indications that the domestic prices of petrol and other derivatives of crude oil and gas could rise sharply in tandem with the ongoing war involving the United States and Israel against Iran.
With the Strait of Hormuz shut and shipping activities around the Gulf region stalled, analysts warn that Nigerians should brace for a hike in petrol prices amid rising import and refining costs.
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The stakes increased significantly following the abrupt closure of the Strait of Hormuz — the narrow waterway through which about half of the world’s crude oil and condensates are exported.
Iran announced that the strait is closed and warned that it would fire on any vessel attempting to pass through it, according to Iranian media reports.
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Data from analytics firm Vortexa shows that, on average, more than 20 million barrels of crude oil, condensate and fuels transited the strait daily last year.
Major members of the Organisation of the Petroleum Exporting Countries — including Saudi Arabia, Iran, United Arab Emirates, Kuwait and Iraq — export most of their crude via the strait, largely to Asia.
Oil price surge
The escalation of the crisis has already triggered a sharp rally in global oil prices. Brent Crude jumped by almost 10 per cent at the commencement of trading on Monday, rising to $79.41 per barrel from $72.87 on Friday — a seven-month high — based on figures from FactSet.
Analysts say there are strong indications that prices could climb to $120 per barrel if the war persists.
Donald Trump has said the conflict involving the US and Israel could last about four weeks.
Speaking at the White House on Monday, he described US action against Iran as necessary, stating that the country’s nuclear programme was “growing rapidly and dramatically, and this posed a very clear, colossal threat to America and our forces stationed overseas.”
Uncertainty
Several shipping and trucking companies operating around Gulf countries have reportedly halted operations due to safety concerns.
It was reported that an estimated 200 tankers carrying crude and LNG have dropped anchor or diverted to avoid the strait while major shipping firms like Hapag-Lloyd and CMA CGM have suspended all transits through the waterway.
The conflict has also caused War risk insurance premiums to skyrocket by up to 50 per cent, making transit economically unviable for most operators.
A significant portion of the feedstock crude processed by the Dangote refinery is often imported from other countries. Globally, over 9–10 million barrels of crude oil are transported daily through the affected routes, underscoring the scale of potential disruption.
Higher global energy prices typically translate into increased costs for consumers, from petrol at filling stations to groceries and other essential goods and services.
On Monday, Oil and gas traders spent days scrambling for alternative sources of supply to Asia outside of the Middle East amid concerns that a prolonged conflict could choke off flows from the energy-rich region.
It was reported that Asian nations, including China, have stockpiles of crude and LNG that will help to buffer any short-term disruptions, but a sustained conflict threatens to quickly drain those supplies.
Alternatives outside of the Middle East will likely be more expensive, with bloated freight rates adding to spiraling costs for importers.
Implications for Nigeria
Although Nigeria, one of the world’s leading oil producers and exporters, may benefit from higher crude prices, there is a strong likelihood that the cost of refining crude and importing refined products — as well as other goods and services — will increase amid shipping disruptions.
Typically, Nigerians depend heavily on imported fuel and locally refined petrol, majorly from the Dangote Refinery. With the disruption of supply and shortages triggered by the ongoing war, consumers in Nigeria are expected to pay more for fuel, gas, and other derivatives.
On Monday, the Dangote Petroleum Refinery increased its petrol gantry price by N100, raising the ex-depot rate from N774 to N874 per litre amid renewed volatility in global crude oil markets.
An official of the refinery confirmed the adjustment on Tuesday morning to PREMIUM TIMES. “It is true,” the official told PREMIUM TIMES Tuesday morning. Although the company is yet to release an official statement to that effect.
Filling stations in Abuja have already adjusted their prices in Abuja. On Tuesday morning, PREMIUM TIMES observed that both Conoil and NNPC filling stations along Airport road in Lugbe are selling at N960/ litre as against N880 and N875 it was sold at on Monday.
The filling station’s vendors said the prices were adjusted on Tuesday morning.
The prospect of another fuel price increase comes at a time when households are already grappling with elevated inflation, raising concerns that the renewed geopolitical crisis could deepen economic pressures in Africa’s largest economy.
