Stemming frequent fuel price hikes

When crude oil price in the international market attained an all-time high of $100 per barrel earlier in the month, there was mild apprehension locally that the standard government response of jerking up prices of petroleum products was imminent. And to step up the apprehension, President Umaru Musa Yar’Adua was said to have written to the Minister for Energy (Petroleum), Mr. Odein Ajumogboia, and his counterpart in the Ministry of Labour to convene a stakeholders’ meeting on the matter.

The president had asked them to ensure that the meeting reached a common position on how to handle the likelihood of domestic oil prices being eroded by the increase in the international market. That meeting held on January 8, 2008 and the fear of another round of petroleum price hike was arrested. Discussion on that was not part of the meeting and government has said it is not contemplating increasing pump prices.

So, this time, Nigerians have been spared the usual social and economic troubles that are associated with hike in petroleum pump prices and their aftermath. We commend government for honouring the agreement it reached last June with the Nigeria Labour Congress (NLC) that it will not increase petroleum prices until one year – that is until June this year – even if there is a jolt in the international market, as it has happened now.

Again, we are delighted that the meeting between the NLC and the Ministries of Energy (Petroleum) and Labour came at the time it did. Specifically, it delights us that the meeting was a departure from the crisis-solving one to crisis-preventive measure. The meeting, as both sides reported, was to find a framework for establishing a larger forum that can put an end to the periodic crises that have troubled the industry. We encourage both sides to consolidate on this first constructive meeting.

For years now, petroleum prices have constituted a major, constant friction between government and the populace represented by the NLC. Government, during each round of price increase, always gave several reasons ranging from the nuisance of smuggling to the burden of oil subsidy.

The first increase in petroleum products was in 1978 when the then General Olusegun Obasanjo as military head of state, jerked it up from 8 kobo to 15 kobo. In a way, that was the death of innocence, as far as prices of the products are concerned. Since then, it has been coming in torrents as the crude oil prices fluctuate in the international market. Today, the PMS (petrol) sells for N70 from N65 last June.

Nigerians are interested in having an enduring price mechanism for petroleum prices. But more importantly, we agree with a wider segment of the society that domestic petroleum products prices should be insulated from the ebb and flow of the international crude prices. Also it is important for government to begin to think more creatively and find creative policy interventions, just as it should look for political will and capacity to engage vested interests in order to find a lasting solution to the crisis of petroleum supply, distribution and pricing.

Again, the case must be made for the revitalization of domestic refineries. It is acknowledged that prices of petroleum products would not only be cheaper, but will also be manageable with the existence of refineries. We also agree that because Nigeria is a major world producer of oil, its nationals are deserving of premium benefits.

And that would mean that the controversial issue of subsidy should not have a place in our circumstance. Nigerians deserve subsidy in petroleum products like other nationals are deserving of and are enjoying subsidies in their country’s area of comparative advantage. Subsidy is also a mechanism to stimulate economic development of both individual citizens and a nation.