Petrol prices to crash as Strait of Hormuz reopens

The reopening of the Strait of Hormuz following a ceasefire agreement in the Middle East is expected to calm global oil markets and ease petrol prices, but experts have warned that Nigerians may not see immediate relief at the pumps.

They noted that while easing global oil prices could reflect in Nigeria’s downstream market, petrol prices may gradually decline to around N1,000 per litre if market forces are allowed to operate.

Two experts and oil marketers spoke in separate interviews with The Punch on Friday in Abuja.

An energy law expert at the University of Lagos, Dayo Ayoade, said the ceasefire involving the United States, Iran and Israel had restored confidence in global shipping routes, but its impact on domestic fuel prices would take time.

He described the truce as a short-term stabiliser for the oil market, noting that it would ease supply chain disruptions that had driven up crude prices in recent weeks.

“In the short term, we would have relative peace because it is a ceasefire, and hopefully it would hold, but it is essentially a confidence-building mechanism between the contending parties. “What we can expect is that oil markets would react positively. So, we should see gradual normalisation of oil prices because tankers still have to move through the strait to reach their destinations,” Ayoade said.

He added that the reopening of the critical transit route would boost investor confidence and restore the flow of commodities across global markets.

“There would be an immediate boost to confidence as this shipping bottleneck ends. This means disruptions affecting fertilisers, jet fuel and even food supplies would ease,” the expert said.

Ayoade noted that the development would benefit oil-importing countries in Africa and Asia that had been grappling with rising energy costs.

However, he said the easing of oil prices could reduce recent revenue gains by oil-producing countries like Nigeria.

“On the other hand, the oil price gains enjoyed by oil-producing countries like Nigeria may decline. So, it is a mixed outcome,” Ayoade added.

On domestic fuel prices, he said Nigerians should expect a gradual reduction rather than an immediate drop.

“There would be a price drop, but it will take time to reflect locally. It won’t happen immediately, but within two to three weeks, if the ceasefire holds, we should see gradual normalisation,” the expert said.

Also speaking, the Chief Executive Officer of Petroleumprice.ng, Olatide Jeremiah, warned that although global oil prices had started declining, local marketers might delay passing on the benefits to consumers.

He said, “Depot and retail prices are expected to drop, but there are concerns that players may not reflect global price changes promptly in the local market. Nigerians have borne the burden of rising prices; reductions should also be reflected accordingly.”

Jeremiah disclosed that crude prices had already recorded a sharp drop following the reopening of the Strait.

“Oil prices dropped by about 11 per cent today alone. As movement resumes through the Strait of Hormuz, petrol prices could fall below N1,000 per litre within days,” he added.

Similarly, the Petroleum Products Retail Outlets Owners Association of Nigeria projected that petrol prices could drop from the current N1,261 per litre to below N1,000.

The association’s Publicity Secretary, Joseph Obele, said crude prices had begun to decline following the easing of tensions.

He recalled that petrol sold for about N800 before the crisis escalated in February, expressing optimism that prices could return to that range if the situation stabilises.

“With the reopening of the Strait of Hormuz, Nigerians should expect a significant reduction in petrol prices. It could drop below N1,000, possibly around N900 per litre, if current conditions are sustained,” Obele said.

He also urged the Nigerian National Petroleum Company Limited to expedite the reopening of refineries, including the Port Harcourt refinery, to further reduce fuel costs.

Responding to concerns about delayed price adjustments, Obele urged marketers to align pump prices with their costs.

“Marketers should sell based on their cost prices. Those with old stock should adjust fairly and reflect reductions when they receive new supplies,” he said.

Founder of the Centre for the Promotion of Private Enterprise, Muda Yusuf, on his part, said the easing of crude oil prices could translate into lower pump prices, although existing stock bought at higher rates may delay immediate relief.

“We should see the impact within the next few weeks. Even though marketers and oil companies would say that the stock they have has to be exhausted because they bought it at a high price. Oil price is already dropping just today. So if there is no violation of the ceasefire, we should be expecting major relief in terms of pump price,” he said.

However, an economic expert, Sheriffdeen Tella, cautioned that the drop in oil prices may not immediately lead to a reduction in fuel costs.

“The opening might ease, but what about those increasing output? One thing is for output to increase, and another is for the route to be clear. It may not translate into prices coming down soon. Countries like Nigeria may still be making some gains,” he noted.

Global oil markets had surged earlier in the week after tensions in the Middle East disrupted shipping through the Strait of Hormuz, a key route for about a fifth of global oil supply.

However, Iran’s Foreign Minister, Abbas Araghchi, announced on Friday that the waterway would remain open to commercial shipping as long as the ceasefire holds.

“The passage for all commercial vessels through the Strait of Hormuz is declared completely open for the remaining period of the ceasefire,” he said.

The announcement followed ceasefire arrangements involving Iran, the United States and Israel after rising hostilities that unsettled global energy markets.

Reacting, US President Donald Trump welcomed the development but said restrictions on Iran would remain pending a broader agreement.

Meanwhile, President of the Dangote Group, Aliko Dangote, had earlier warned that prolonged oil price volatility could impact key sectors, including aviation and agriculture.

He noted that rising fuel costs were already affecting airline operations and fertiliser prices.

“Two months ago, fertiliser was about $400. Today, it is $850. Governments may need to provide subsidies this farming season,” Dangote said.

Energy analysts said the crisis highlighted the vulnerability of global oil supply routes, with expectations that Middle Eastern producers may invest in alternative pipelines to reduce reliance on the Strait of Hormuz.

Ayoade noted that the development could also accelerate the global shift to renewable energy.

“Developed countries may intensify efforts to reduce dependence on Middle East oil. Nigeria must be strategic in navigating this transition,” he said.

The Strait of Hormuz remains one of the world’s most strategic oil transit routes, linking the Persian Gulf to global markets.

Disruptions along the corridor typically trigger sharp increases in crude oil prices, with widespread effects on fuel, food and transportation costs.

The latest crisis, driven by tensions involving Iran, the United States and Israel, had pushed oil prices upward before the ceasefire restored relative calm to the market.