Professor Emeritus of Petroleum Economics and renowned energy expert Wumi Iledare has explained why falling crude oil prices do not immediately translate to a reduction in fuel pump prices.
Prof. Iledare noted that while it is natural for consumers to expect that if a major input falls, the prices of refined petroleum products should also decline, it is, however, important to recognise that the relationship between crude oil prices and retail petroleum product prices is neither direct nor instantaneous.
He disclosed this in a statement on Friday.
His comment comes amid calls by Nigerians for a commensurate drop in the price of fuel following the drop in the crude oil price.
DAILY POST reports that West Texas Intermediate and Brent crude fell to $69.34 and $72.56 per barrel, respectively, at almost the same rate before the Iran-United States-Israel war escalation on February 28, 2026.
With the falling crude prices to pre-Middle East crisis levels, consumers have demanded a drop in the price of fuel to around N900 per litre, the rate before the crisis.
Currently, retail fuel prices stand between N1241 and N1305 per litre in Abuja after the petrol reduction.
Recall that in the last two weeks, Dangote Refinery had reduced its gantry petrol price by N125 to N1,125 per litre, with the latest on Thursday.
Despite this, Nigerians have continued to urge further reductions in a commensurate measure with the crude oil price drop.
Two days prior, United States President Donald Trump had ordered his officials to investigate elevated gasoline prices despite a drop in crude oil prices.
Reacting, Iledare said from an economic perspective, petroleum product prices often exhibit what is known as asymmetric price transmission.
“Simply put, increases in costs are usually reflected at the pump much more quickly than decreases. Price increases tend to move like an elevator, while price reductions often descend like a staircase. This is largely because products already in storage or transit were purchased at earlier, often higher, prices. Immediate reductions before existing inventories are exhausted could result in significant financial losses for marketers and ultimately threaten supply stability.
“In Nigeria, the exchange rate is perhaps the most critical variable after international product prices. Since petroleum products or their production inputs are largely priced in U.S. dollars, any depreciation of the naira can substantially offset the benefits of declining crude oil prices. Consequently, lower crude prices alone do not automatically guarantee proportionate reductions in domestic pump prices.
“It is also important to distinguish between the price of crude oil and the prices of refined petroleum products. These markets, while related, are not perfectly synchronised. Refining margins, global product demand, seasonal consumption patterns, and supply disruptions can all influence the prices of petrol, diesel, and aviation fuel independently of crude oil prices.
“The deregulation framework introduced under the Petroleum Industry Act (PIA) envisions that market forces—not administrative directives—will determine petroleum product prices. As such, when underlying market fundamentals genuinely support lower prices, competition among suppliers and marketers should naturally transmit those benefits to consumers. Encouragingly, Nigerians have already witnessed some downward price adjustments in recent months as international market conditions improved.
“The current debate, therefore, should not be whether prices must fall but whether they are falling in a manner that reflects the realities of market fundamentals.” “Sustainable price reductions are preferable to artificial or premature adjustments that could create supply disruptions or undermine investor confidence in the downstream petroleum sector.
“Ultimately, Nigerians deserve affordable energy. Achieving this objective, however, requires more than lower international crude oil prices. It demands exchange rate stability, increased domestic refining capacity, efficient logistics, competitive markets, and policy consistency. These structural factors will deliver more durable and meaningful relief to consumers than temporary fluctuations in crude oil prices alone,” he stated.
Discover more from NAIRAVOICE.COM.NG
Subscribe to get the latest posts sent to your email.
