Why There Is Aviation Fuel Shortage In Nigeria, Sub-African Countries

While stocks of Aviation or Jet A fuel in the Organisation for Economic Co-operation and Development (OECD) are running low, across sub–Saharan Africa, there are real fuel shortages.

According to the Economist last week there were  physical shortages of jet fuel, gasoline and diesel in Senegal, South Africa, Cameroon, Kenya and Nigeria

The physical shortages have reached Africa first due to a combination of factors. The current backwardation in the Brent futures market is driving traders to sell crude immediately into Asian markets, rather than use floating storage offshore West Africa, where local traders can pick up small volumes as those tankers pass by.

Hedging costs for local traders are increasing in line with the oil price, forcing those unable to expand their balance sheets to reduce imports. Africa has little domestic refining capacity, which is why people are forced to queue for fuel in Nigeria, a major crude oil exporter, and most countries in sub-Saharan Africa do not maintain supplies in reserve, as is common in the OECD.

Maintaining a strategic reserve does not eliminate the risk of shortages, it just delays them. The longer the current production deficit persists, the more nations will start to see this type of supply shortage.

The Minister of Aviation, Senator Hadi Sirika, has said the current aviation fuel scarcity in the country with its attendant high cost is not…

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He spoke Tuesday while briefing reporters after accompanying a delegation led by the Secretary General of International Civil Aviation Organization (ICAO), Mr Juan Carlos Salazar, to the State House, Abuja.

Sirika, who explained the reasons for the high cost of the product globally, also took time to speak on what the government was doing to arrest the spiral in the price of the commodity.

He said: “The scarcity and high cost of Jet A1 in civil aviation is not peculiar to Nigeria. It is a global phenomenon driven by many factors. Some of them include even low capacity to refine the product. It’s also high demand around the world, it has increased activity and increased number of airplanes out there and users of this jet A1.

He said this a time when crude itself is so expensive today, it is in the hundreds of dollars per barrel and n it affecting the cost of Jet A1 product in Nigeria. Also, the peculiarity of the fact that we’re not refining the product, so to speak.

As  I did address the press a couple of days ago, saying that, by the grace of God, perhaps once the Dangote refinery is online or if the government fixes the Port Harcourt refinery, which is now ongoing, we will begin to refine this product and sell it.

“And as a stopgap measure, interim measure, there’s an agreement that the airline operators of Nigeria would nominate either from out of themselves or from other major oil marketers to be given the opportunity to import this product. Then, also get the necessary foreign exchange for that purpose. And that will now increase more supply and perhaps drive down the cost.

“So, this is not unique to Nigeria. And unfortunately, we’re going through this phase, but civilization from time always survives challenges. They come, unfortunately, but then you see civil aviation graphs keep going up. We hope that this is a temporary thing around the world and we hope that Jet A1 will be very available everywhere and at a very good price.

“And we will hope, in the future, that we learn to do away with all these carbon emitters and have a much more cleaner energy, which will be more readily available for everybody on a very cheaper cost to make civil Aviation transportation, the preferred choice.”

According to the International Energy Agency (IEA) both Brent and WTI spot and futures prices were down this month, but $100/bbl appears to be a floor.

The EIA raised its estimate for 2023 prices by $5/bbl to $97/bbl. The Center for Strategic and International Studies warned that EU sanctions on Russian oil would be likely to push prices sharply high

The IEA held its 2022 oil demand estimate steady at 99.4 MMbbl/day (1). OPEC cut its 2022 demand forecast by 200,000 bbl/day, from 100.5 MMbbl/day last month to 100.3 MMbbl/day this month (2), citing a slowdown in global growth and the impact of a COVID-19 outbreak in China.

The EIA cut their 2022 demand estimate by the same amount, from 99.8 MMbbl/day to 99.6 MMbbl/day, again citing concerns about growth in China (3). The EIA also cut its 2023 demand estimate by the same margin, bringing that down to 101.5 MMbbl/day.

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