THE DEREGULATION OF THE OIL INDUSTRY OF THE DOWNSTREAM SECTOR, PROBLEM AND PROSPECT

ABSTRACT
In recent years, the majority of price made in petroleum sectors by marketers at the downstream sectors or by the government has been on the upward trend. This is a contemporary issue, which can hardly be ignored and diverse literatures have been directed toward this area of thought. However, little has been done in the realm of price decision and public policy. Most analysis done in the area of petroleum sector has been concerned primarily with trend in production, revenue and economic growth, which are no doubt helpful to the oil companies and producer government. Although no existing work deal comprehensively with the complex political and economic relationship between and within the under-develop and develop countries centering around the most vital commodity ‘oil’, this research work had some light on the issue of petroleum product, price review or pump price review and the deregulation of the downstream sector of the oil industry, in addition to this, it went further to take a look at the problems, objectives, significance, limitation and some definition of terms, it also reviewed some literature and advance the reasons and conditions for the deregulation of the downstream sector of the oil industry.

THE DEREGULATION OF THE OIL INDUSTRY OF THE DOWNSTREAM SECTOR, PROBLEM AND PROSPECT

CHAPTER ONE
INTRODUCTION
1.1    Background of the Study
Petroleum products supplies have always been an acid test for successive governments in Nigeria. With the democratic dispensation, the supply and distribution of petroleum products improved but this was without a price frequent increase in petroleum products prices. With few months to the end of the regime, the ugly incidence of petroleum scarcity surfaced again and one begin to wonder if there is any solution to the problem.
The contemporary passion and tension that usually characterize petroleum discourse is due to inexplicable deprivations and sufferings of Nigerians amidst plenty and abundance of these products. As the 6th largest producer of petroleum, it is a paradox that in the past decade, supply of all products has been erratic and on sharp decline ironically, as supply declined, products prices have been on the increase as successive governments searched for “appropriate pricing”.

Definition of Deregulation

Deregulation is concern with government granting of licenses to private investors to come and invest in a literalized sector. It is also concerned with government withdrawal of subvention from its monopolized firm, the allowing or entry of business by removing all forms of barriers.
On the other hand, deregulation is government withdrawal from monopolizing a particular sector, determination of what is expected from the firm and the total or partial entrance into such sector or firm by private individual. It could be said to be the effective and efficient running of government owned firm, parastatals or company by private individual for more vibrant productivity with the core interest of profit maximization.
Dr Edmund M. Dankoru (1992) said “we all know that we have breakdown of facilities, inevitably and not surprisingly, there existing smuggling or arbitrages of scandalous proportions. There are bridging and logistic problems; there are institutional corporate, structural and organization problems. The Nigerian people are not interested and should not be interested in these problems, all they want to know is that the product is available when they want it.

The Development of the Nigeria Oil Industry

The advent of the oil industry can be traced back to 1908, when a German entity, the Nigerian Bitumen men corporation, commenced exploration activities in the Araromi Area, West of Nigeria. These pioneering efforts ended abruptly with the outbreak of the First World War in 1914.
Oil prospecting effects resumed in 1937, when Shell D’Arcy (the forerunner of Shell Petroleum Development Company of Nigeria) was awarded the sole concessionary rights covering the whole territory of Nigeria. Their activities were also interrupted by the Second World War, but resumed 1947, concerted efforts after several years and an investment of over N 20 million, led to the first commercial discovery in 1956 at Oloibiri in the Niger Delta.
This discovery opened up the Oil industry in 1961 bringing in Mobil, Agip, Safrap (now Elf), Tenneco and Amose as (Texaco and Chevron respectively) to join the exploration efforts both in the onshore and areas of Nigeria. This development was enhance by the extension of the concessionary rights previously a monopoly of shell, to the newcomers. The objective of the government in doing this was to replace the exploration and production of petroleum. Even now more companies, both foreign and indigenous have won concessionary rights and are producing. Actual oil production and export from the Oloibiri field in present day Bayelsa

Conditions Necessary for Deregulation

Deregulation as earlier stated is government decentralization of the oil sector. Though, there are some sectors that have been deregulated long ago, like the telecommunication sector-radio and television, the education sector government and private, the transport sector and so on. Now, it is on the oil sector.
For deregulation to take place successfully there is the need for certain necessary things to be put in place. Government must first and foremost, liberalized the oil sector to allow for free entry of private businessmen or investors by removing all necessary barriers, subventions being given by Government to the oil sector must stop, the facilities already on ground should be effectively and efficiently maintained by government. Those willing to set up a refinery in the country, firms or investors willing to undertake such ventures should be allowed to freely explore process and sell refined product and crude on their own, but must pay taxes to government in return. In addition to this, there should exist a stable government policy to secure new firm coming into the sector at least for sometime or period. When those things are met, then, the necessary conditions for deregulation would be met.

Reasons for Deregulation

There are a lot of reasons for the deregulation of the downstream sector of the oil industry. The reasons range from the oil sector down to the industrial sector to the educational sector, rural development, infrastructure (communication and transport) health sector, economic investment (agriculture) petro-chemical and gas industry. Some of these reasons could be taken summarily as follows:
The Oil Sector:  A good reason for deregulation is that it will bring competitiveness and effectiveness; there will be enough domestic consumption, sharp practices like smuggling be drastically reduced. It will bring about public participation and more refineries will come, more employment opportunities, rural dwellers will be able to enjoy petroleum products and Nigeria will become a net exporter through various refineries rather than an importer.
With the Industrial Sector: The reason for deregulation will be to make and allow industries operate at full capacity with the meeting of their energy needs, thereby ensuring more employment opportunities for Nigerians.

THE DEREGULATION OF THE OIL INDUSTRY OF THE DOWNSTREAM SECTOR, PROBLEM AND PROSPECT

ABSTRACT
In recent years, the majority of price made in petroleum sectors by marketers at the downstream sectors or by the government has been on the upward trend. This is a contemporary issue, which can hardly be ignored and diverse literatures have been directed toward this area of thought. However, little has been done in the realm of price decision and public policy. Most analysis done in the area of petroleum sector has been concerned primarily with trend in production, revenue and economic growth, which are no doubt helpful to the oil companies and producer government. Although no existing work deal comprehensively with the complex political and economic relationship between and within the under-develop and develop countries centering around the most vital commodity ‘oil’, this research work had some light on the issue of petroleum product, price review or pump price review and the deregulation of the downstream sector of the oil industry, in addition to this, it went further to take a look at the problems, objectives, significance, limitation and some definition of terms, it also reviewed some literature and advance the reasons and conditions for the deregulation of the downstream sector of the oil industry.