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Fuel Pricing: Between government, marketers and the people

By Dr. Sulaiman Sani

The subject of pricing fuel for domestic consumption has been a challenging one since the advent of this democratic dispensation (1999-date). A look into the subject reveals on the one hand the failure of successive governments to effectively control and regulate the pricing process and on the other hand, the increasing greed of marketers to make continuous-time profits at the detriment of the people and the country . Initially, past governments are to be blamed for this pricing mess because how on earth can I cook food in my house then sell all of it and whenever my kids cry of hunger, I rush to buy from outside? When you look at it from this angle, you end up believing that the government who initiated this sell-all-and-buy-from-outside is the initial point where we get this pricing thing wrong. For, if we do everything from the inside, the increasing problem of fuel importation leading to the present pricing problem will not have arisen. One may argue that the referred government met infrastructural decay in the oil sector to the extent that buying from outside is significantly more beneficial than processing it in the country. Agreed, but for a responsible government that has the people and the nation at heart, if the decay reached such thresholds in the beginning, a time frame under which it shall be brought to an end should have been designed. The way this fuel importation business looks presently is a business without end and that means continuous-time pricing wars between the government (the creator), the marketers (the beneficiary) and the people (the sufferer). The consequence of this mess is becoming glaring every passing minute in form of pricing wars between the government and the marketers, appearance of long queues in filling stations nationwide mostly due to hoarding activities by the marketers for their selfish interest. What is clear to us all is the rapidly changing price of fuel in filling stations nationwide.

Presently, we have a new government in place and from the look of things; it appears that the government is interested in solving this pricing problem for the good of all on board. In this bid, I found it necessary to advice on the best way to solve this problem for the good of all of us.

The government should understand that fuel price like any other price is a stochastic variable. Thus, there is no need to force it assume a given value. It will resist any attempt to corner it at a point owing to ever changing market factors. Hence, there is the need to show sensitivity to the price itself. The government should understand that point pricing (where the price assume a single value for a given time) adopted by previous administrations led to this unending wars. The wars become unavoidable since any slight deviation from the price point gives another price point which differs from the original price. The new point now becomes an object of controversy leading to price wars, hoarding activities and the appearance of long queues.

A new pricing model should be put in place. I recommend an interval pricing policy where instead of fixing fuel price at a point, it should be defined in an open interval containing all realistic values of the price. In such open intervals containing all possible fuel prices, there are infinitely many possible prices. Similarly, a drift in price will not create unnecessary waves as in the point pricing case since; the new price necessarily belongs to the interval. Most importantly, unlike in the point pricing model here, the marketers themselves can adjust to changing market turns and make good profits resorting to hoarding as a means of promoting business. By so doing the people are saved from the lion grip of the marketers which leads them waiting in long queues to buy fuel. Open interval pricing is robust in this sense and can accommodate all the three players in this field.

The open interval pricing policy is not an end in itself. It is also a means to an end solution; which is to upgrade fast the refineries in the country or build new ones, so that oil importation business itself should stop or its effect nullified. The greatest effect being the huge amount of money budgeted for fuel subsidy which in practice does not even exist. When importation moves to a minimum value and our refining machines working, our hard earned monies for subsidies is saved. It is our earnest prayers that a day in the near future exists when all our refineries will be producing to the maximum capacity to save us all from the hands of the capitalists.

Dr. Sulaiman Sani, Dept. of Mathematics and Computer Science, Umaru Musa Yar’Adua University, Katsina-Nigeria, +2349037834473 [email protected] , [email protected]