Goldman Sachs has predicted oil price will likely to rise to $100 again, citing lower production output from the Organization of Petroleum Exporting Countries (OPEC), amongst others.
But Bismarck Rewane, Chief Executive Officer (CEO) of Financial Derivatives Company (FDC) Limited says it will only increase revenue to governments but will not benefit Nigerians.
“Globally, oil prices trade at $95/b and are projected to hit $100/b by year-end due to supply shortages. While government revenue, Federal Account Allocation Committee (FAAC) could increase in naira terms, Nigeria’s reliance on imported energy products (LPG, diesel, petrol and kerosene) amid a falling naira means higher food and transport costs, exacerbating inflationary pressures”, said Rewane in a statement yesterday..
He said, these will be major considerations for the MPC at its next meeting, whenever that will be. Nonetheless, we expect the MPC to remain hawkish.
Rewane in its FDC Prism yesterday however said, some form of looking inward could solve Nigeria’s economic woes.
“Viable options would be improving the value addition of top agricultural traded products like cashew and cocoa, as well as mineral resources like steel. More importantly, Nigeria needs to show its political will, improve access, and encourage local businesses, particularly SMEs, to participate in the AfCFTA by removing non-tariff barriers, he said..
Analysts noticed that, even with higher gas prices, Electric Vehicles (EV) purchases have slowed down instead of rising.
In Europe, the deindustrialization of Germany is no longer news, the car industry is bracing for a Chinese EV rush, and Brussels is trying to build an energy transition supply chain from scratch.
Meanwhile, offshore wind developers are canceling projects in both Europe and the U.S., solar developers in the EU are complaining about cheap Chinese panels.
Also meanwhile, oil and gas companies keep reporting meaty profits and investors are rediscovering their love of hydrocarbons.
At the recent World Petroleum Congress (WPC) in Calgary, oil executives and government officials both warned against the continued push to discourage investment in new hydrocarbon production.
“There seems to be wishful thinking that we’re going to flip a switch from where we’re at today to where it will be tomorrow,” Exxon’s chief executive said during the event.
“No matter where demand gets to, if we don’t maintain some level of investment industry, you end up running shorter supply which leads to higher prices,” Darren Woods also said.
This is exactly what we are currently witnessing in Europe and the United States. Because of the transition push, oil producers are being extra cautious with production growth. Also, they are prioritizing shareholder returns to keep shareholders on, so it pays for them to be cautious.