Kerosene scarcity and PHRC’s bumper production

The spate of buck-passing over kerosene scarcity and its intolerably high price took a dramatic turn last week with a key stakeholder opening a can of worms in its defence.
Bafred Enjugu, the managing director of Port Harcourt Refinery Company (PHRC) moved to address the incessant claims that the refineries were responsible for the crippling supply deficit plaguing the kerosene market in Nigeria.

Enjugu reeled out an array of statistics that raised more questions than it answered. The managing director of Nigeria’s largest refinery told newsmen that in 2016 his company’s daily production stood at 1, 200 trucks. He lamented that production challenges reduced the figure to 800 trucks in 2017.
Enjugu wondered why there should be scarcity of kerosene with the huge quantity pumped into the market daily.  He eventually blamed the scourge of kerosene scarcity on “market forces” which he said were beyond his company’s control.
No one knows precisely what he described as “market forces”. Campbell D. McConnell, the ace American economist identified the market forces of demand and supply as the invisible hand on the price mechanism.

Industry watchers however contend that Enjugu’s “market forces” was a euphemism for Nigeria’s dubious marketers who hide the product, conjure artificial scarcity and hike prices.
It is difficult to say precisely how much kerosene comes out of Nigeria’s crippled refineries.  Enjugu couched his statistics in unfamiliar technical jargon.
Refineries’ feedstock (crude oil) is measured in barrels. The refined products are measured largely in litres. However, Enjugu deliberately expressed the output of PHRC in number of trucks and was silent on the size of trucks.
No one knows whether he was referring to the 33,000-litre trucks used for hauling petrol or the 11,000-litre trucks used in delivering kerosene even to fuel retail outlets.

If he was referring to the 33,000-litre trucks, then PHRC would have been churning out 39,600, 000 litres of kerosene daily in 2016.  However, if the trucks he mentioned had capacity for 11,000 litres of kerosene, the refinery in Port Harcourt would have been supplying the market with 13,200,000 litres of the product daily during that turbulent year.
Ironically, the kerosene supply deficit was at calamitous proportions during the year despite the huge quantities from PHRC.  The production figure flaunted by Enjugu could inexplicably not address the yawning deficit in the market.
Nigeria’s kerosene consumption figure remains a guarded secret known only to the men in the Nigerian National Petroleum Corporation (NNPC), Products and Pipelines Marketing Company (PPMC) and the Petroleum Products Pricing Regulatory Agency (PPPRA).

However, it is widely assumed that more petrol is consumed daily in the country than kerosene.
Since the partial deregulation of petrol market in May, 2016, consumption of the commodity has dropped to 30 million litres per day. With that in mind, it could be assumed that at the best of times, kerosene consumption cannot be higher than 35 million litres per day.
If the number of trucks flaunted by Enjugu is the 33, 000-litre trucks, then PHRC alone would have been producing more kerosene in 2016 than the Nigerian market could consume.  If it is the smaller trucks, the company would have produced close to half of the nation’s demand.

Either way, the figure is so significant that the supply deficit which drove the price of the commodity through the roof would have been drastically curtailed.
The truth is that locally refined kerosene can hit the pump with a price tag well below N50 per litre. Consequently, there is no reason why Nigerians should pay N350 per litre of kerosene refined by PHRC.
Enjugu’s angry outburst points to one significant factor that had all along been ignored.  A huge quantity of locally refined kerosene enters the market and is subsumed by the little quantity of imported kerosene and sold at the price of the imported product to hapless consumers.

There is absolutely no reason for Nigerians to buy kerosene at N350 per litre if PHRC alone produces 39 million litres daily. The federal government should institute a high powered probe to unravel the “market forces” in Enjugu’s theory and the role it played in the perennial kerosene supply deficit that has driven the pump from N80 to N350.
The managing director of PHRC knows who lifts the products of his company.

He however would not know what happens when the product leaves the premises of PHRC.
It is the responsibility of the Department of Petroleum Resources (DPR) to know what happens to the kerosene refined by PHRC.  Enjugu was implicitly indicting DPR when he said that with the quantity of kerosene his company produces, no one should talk about scarcity.  But the scarcity is even more pronounced in Rivers State, the home base of PHRC.
Kerosene scarcity has plagued the country long enough for DPR to have independently probe the missing link between PHRC’s huge production figures and the lean quantity entering the market. If Enjugu’s figures are reliable, then the market forces beyond his control that cause artificial scarcity and hike price must be the same set of marketers who stole N1.2 trillion from the fuel subsidy fund in 2011.