Oil marketers have said the recent decline in petrol prices could prompt many Nigerians who switched to Compressed Natural Gas (CNG) as an alternative energy source to return to using petrol, as lower pump prices improve affordability and boost demand.

The marketers also projected increased patronage at filling stations, saying operators with efficient supply chains stand to benefit from higher sales volumes as petroleum product prices continue to ease following developments in the global crude oil market.

The latest price reductions followed the recent peace deal between the United States and Iran, which eased tensions around the Strait of Hormuz and pushed crude oil prices down from as high as $120 per barrel to about $77 per barrel.

As a result, petrol prices in Lagos and neighbouring areas have dropped from an average of N1,320 per litre at filling stations to between N1,199 and N1,245 per litre. Prices at major depots have also declined from an average of N1,275 per litre to between N1,165 and N1,180 per litre.

Speaking in an interview, the National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Ukadike, attributed the reduction in local petrol prices to improved global crude oil supply and the response of the Dangote Refinery.

“The recent drop in price of petroleum products was born out of the peaceful settlement between Iran and the United States and the opening of the Strait of Hormuz. Now that the supply is coming, now that the vessels are moving in, you are finding that the crude oil has started dropping because there is an increase in supply of crude oil,” Ukadike said.

He added that the Dangote Refinery had aligned its pricing with the changing realities in the international market.

“So now Dangote Refinery, which is the main supplier of petroleum products here in Nigeria because of its strategic nature, has also yielded to that international decrease by also reducing the petroleum products in line with the price of crude oil and factors of its refining here in Nigeria,” he said.

Ukadike said the falling cost of petrol could alter consumer behaviour, particularly among Nigerians who had adopted alternative energy sources due to the high cost of fuel.

“Most people install CNG tanks and use cylinders to run their small-scale businesses because of the cost of petroleum products. I also believe that now that petroleum products are coming down, they will revert back to petroleum products and abandon the CNG and LPG,” he said.

According to him, lower petrol prices would intensify competition among various energy options as consumers reassess which fuels offer the best value.

He further explained that the price decline would ease the financial burden on marketers by enabling them to purchase larger volumes of products with less capital.

Ukadike noted that marketers who previously struggled to finance product purchases would now be able to increase stock levels, thereby improving product availability at retail outlets.

He said marketers who once managed to purchase only a single truck of petroleum products could now afford between 10 and 15 trucks because of the reduced cost of supply.

Ukadike also dismissed fears that operators might hoard products in anticipation of future price changes.

According to him, competition within the downstream sector would compel marketers to sell at prevailing market rates rather than withhold supplies.

Another retail station operator, Mallam Darman Abdullahi, said the decline in petrol prices presents a mix of opportunities and challenges for marketers.

He explained that marketers who had purchased products at higher prices before the reductions are currently grappling with inventory losses, as they are compelled to sell existing stock at lower rates.

Abdullahi, however, noted that cheaper petrol is encouraging increased consumption by reducing transportation and operating costs for consumers and businesses.

He said the expected rise in sales volumes could improve cash flow and turnover for filling station operators, even though profit margins per litre may not necessarily increase.

According to him, operators that maintain efficient supply chains are likely to gain the most from the anticipated increase in demand.

The latest optimism among marketers marks a sharp contrast to concerns raised earlier this year.

In March, oil marketers warned that their businesses were coming under severe strain due to rising petrol prices linked to the conflict in the Middle East.

They said escalating supply costs had placed additional financial pressure on operators, many of whom relied heavily on bank loans to finance petroleum product purchases.

According to the marketers, significantly more funds were required to purchase a truckload of petrol while returns continued to shrink.

They also reported a sharp drop in demand, noting that customers who previously bought 20,000 litres or 10,000 litres had cut their purchases to as little as 2,000 litres or 1,000 litres.

The high cost of petrol at the time compounded the burden of servicing loans obtained at steep interest rates.

With prices now trending downward, marketers say market conditions have shifted in their favour, raising expectations of stronger demand, improved product movement and increased activity across retail outlets. (Arise News)