• 4 Disadvantages of low Petrol prices

    Posted on: February 2nd, 2015 by admin No Comments

    This may seem like a totally insane article, but like they say ‘there is no perfect solution’. The current dip in the global price of crude oil which is edging close to $40 per barrel has been felt by consumers around the globe in so many ways. Like in the US, 2015 has been themed as the ‘SUV year’ as sales projections suggests a boost in the sales of SUVs which isn’t unconnected with the lower cost of fuel and subsequently, lower cost of owning SUVs with significantly larger and more fuel thirsty engines-when compared with sedans.

    So with the #10 drop in petrol price, what can possibly be seen as a disadvantage in this situation? One thing is clear, with the same amount spent-during the #97 per-liter regime-you can achieve a whole lot more and for domestic use of petrol like fuelling of generators, the kegs have a significantly heavier feel when you lift them up after petrol has been dispensed. However for this article here, we will focus on the petrol price drop as it affects the automobile industry (especially the passenger vehicles segment)and general motoring trends in Nigeria; below are a few coined out reasons that may interest you.

    Image credit: www.mintpressnews.com

     

    Heightened pollution levels: one of the earliest signs that something is wrong with your car is when your fuel consumption level suddenly spikes; the next logical step ought to be visiting a workshop to trace the problem to forestall incurring higher expenses. But because ‘petrol is cheap’, you can afford to drive on and continue using your vehicle as if everything is alright. In the process, your under-performing vehicle pollutes the environment; a typical example of a condition that can lead to higher pollution levels associated with higher fuel consumption is driving with your ‘check engine light’ fully illuminated on your dashboard. But in the end who cares about what happens to the environment? One thing is for sure, the heat waves we are currently experiencing early in the year(2015) in Lagos may just be a form of punishment for our collective negligence- but I guess this should be left for an environmentalist to concretely ascertain. However, the green-house effect and global warming is an issue that shouldn’t be ignored and taken likely.

    Low productivity and poor growth of Nigerian automotive service industry: in the US, EPA (Environmental protection Agency) is a critical growth mechanism in the US automotive industry, as new efficiency and fuel economy standards are enforced and facilitated (in collaboration with Auto-makers) by this body. But here is Nigeria, agencies responsible for vehicle monitoring and curtailing vehicle emissions like the VIO (Vehicle Inspection Office) and NESRA (National Environmental Standards and Regulations Enforcement Agency) are highly inefficient and ineffective in this regard. On a micro-economy level, low petrol prices discourage the need for swift intervention of automobile service centers to quickly get problems fixed-as explained in the first paragraph. When motorist can easily shoulder the costs of operating vehicles in bad conditions, you have a situation where plenty cars that should be in workshops/garages are still revving hard on Nigerian roads. This creates some form of economic imbalance which makes the business of providing automobile services less attractive, as the target market doesn’t perceive these services as a ‘critical need’. On the flipside, if the demand for such services is high, we will have higher levels of investment and better competition in this industry segment.

    Less disciplined motorists: still connected with vehicle abuse is a motorist’s level of motoring discipline; which cuts across proper vehicle maintenance, proper driving and obeying traffic rules (after taking out time to learn these rules and signage). Simply put, when you start getting away with driving poorly maintained vehicles, you plant seeds of indiscipline which will spread to other motoring areas.

    Warped market forces and high demand for used vehicles: ever stopped to wonder why Americans sell off fresh looking ‘tokunbo’ cars to Nigerians? Well the reason is simple, after the first 3-5years of Americans owning a vehicle (mostly towards the end of the warranty periods), the cost of maintaining these significantly older cars goes up by as much as 20%. Meaning you will end up spending relatively more money to keep an old car working; so what do they do instead? They trade-in old cars for new ones and the old ones get shipped to Nigeria. But because of the cheap cost of petrol in Nigeria, Nigerian motorists don’t necessarily feel this burden even inspite of our lower quality of roads which can equally raise operating costs of vehicles.

    With petrol prices being low, there is very little motivation to buy new cars as long as old cars look new, hence why tokunbo cars will remain attractive for a while in Nigeria-even after we scale up our manufacturing activities.

    In conclusion the advantages of lower fuel prices outweigh the disadvantages; the main issue in Nigeria boils down to the lack of standards and stringent enforcement of clear cut rules. Using forceful means to coerce motorist to conform to good vehicle ownership and driving standards will not necessarily yield long-term gains; instead the line of thinking in solving these issues should be geared towards achieving cheaper vehicle operating costs which vehicle owners must understand and appreciate.

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