Nonetheless, if prices do breach the $100 per barrel milestone, it could spell negative repercussions, particularly for developing nations.
Mark Zandi, chief economist at Moody’s Analytics, emphasized the concerning outlook, stating that any prolonged period with oil prices above $100 could severely afflict the industry.
It’s important to emphasize that, as per expert analyses, a global crude price resting at $100 per barrel would exert considerable strain on economies characterized by weaker currencies and diminished cash flows, obliging them to purchase dollar-denominated oil.
This scenario paints a grim picture, with the potential to profoundly impact both worldwide economies and energy markets.
The Nigeria context
In Nigeria, fuel subsidy termination was anticipated for May 2023 following the President’s public announcement.
However, the recent surge in global crude prices, coupled with ongoing foreign exchange market turmoil, has reignited discussions about the presence of fuel subsidies.
This speculation stems from the fact that fuel pump prices continue to range from N615 to N620 per litre, even as the nation remains dependent on imported refined petroleum products.
On Wednesday, September 27, Nairametrics found that diesel prices were getting close to N2000 per litre in certain parts of the country.
Despite this, fuel pump prices have not experienced a corresponding increase, indicating a government intervention in stabilizing prices.
With Brent crude inching close to $100 per barrel, a pressing question arises: will the government persist in maintaining artificially controlled fuel prices?
It’s imperative to note that Nigeria is grappling with a pressing need for revenue, prompting a critical evaluation of whether camouflaging fuel subsidies serve the country’s public finance better than prioritizing augmented oil production to capitalize on the current upswing in crude prices.
In a recent Nairametrics webinar held on September 23, focusing on an analysis of President Tinubu’s initial 100 days in office, Chika Mbonu, the Managing Director and Chief Executive Officer of KSBC Advisory Partners Limited, underscored the urgency for the Federal Government to confront present challenges and enhance the nation’s oil production.
Mbonu stressed that this imperative action is pivotal for refining and fortifying the nation’s public finance, encompassing effective revenue generation and astute expenditure management.
The delicate balance between subsidizing fuel prices and bolstering the nation’s economic prospects calls for strategic decisions to secure Nigeria’s financial stability amidst a changing global energy landscape.