The Effect Of 2021 Fuel Price Hike On Transportation System In Nigeria (A Case Study Of Ascent Transport Company (Atm), Abuja)

The Effect Of 2021 Fuel Price Hike On Transportation System In Nigeria (A Case Study Of Ascent Transport Company (Atm), Abuja)

Chapiter 1

Introduction

1.1 The study’s context

The logistics business is continually changing as a result of gasoline market price volatility. Rapid fuel price hikes can have a long-lasting and disastrous impact on freight management organizations, while a rapid drop could lead to a spike in profits and increased competition to provide customers the best deals.

The transportation industry, which is one of the main drivers of globalization and has a huge impact on both daily life and the economy, is one of its key components. The globalization of trade during the 20th century led to the emergence of a global network for freight transportation. One of the most significant economic activity is transportation of freight in particular. According to Ribeiro et al. (2007), freight transport has been expanding even more quickly than passenger transport and is predicted to do so in the future. The three most popular modes of transportation for moving containers are the truck, train, and ship, each of which has its own set of benefits and drawbacks. The cost of transportation is a significant selection criterion among factors that affect choosing the best mode of transportation for the dispatch of freight. The price of oil is the biggest obstacle to today’s transportation prices. The majority of modes of freight transportation continue to be heavily dependent on expensive and limited fossil fuels, primarily diesel fuel (Russell et al., 2014). The price of crude oil is the main factor influencing the retail price of diesel fuel (Noordin et al., 2009). According to McSweeney et al. (2008), crude oil is a key factor in determining the state of the global economy. Whether directly or indirectly, its price changes have an impact on every industrial sector, including the finance, energy, retail, and transportation sectors. The relevance of the oil price to the cost of the energy used for each mode of transportation, the degree to which the oil price is transferred to fuel prices, and the relative importance of the energy cost to total operating costs for each mode are the three factors that determine how the oil price affects the transportation sector (Casamassima et al., 2009). Fuel costs are a direct expense to consumers as well as a cost to the transportation sector. One of the most significant elements affecting transportation costs is the price of fuel, which accounts for more than half of all operating expenses in the transportation sector today (Ribeiro et al., 2007). The oil price has become a crucial consideration when choosing a freight method because the sensitivity of operational costs for transport to changes in the price of oil differs greatly among shipment modes. Since marine fuels are immune from government taxation, Casamassima et al. Noordin et al. (2009) found that the sensitivity of fuel prices for road mode and railway crude oil price was 40%, while maritime was 100%. Additionally, they calculated that a twofold increase in crude oil prices would have a 10% impact on shipping costs by road and rail and a 50% impact on shipping costs by sea.

Carriers are compelled to increase pricing or suffer losses as fuel costs rise. The cost of fuel consequently affects not just the logistics firm but also the shipper and the shipper’s source of revenue. It is a domino effect that spreads outward: If the cost of shipping the freight increases, the shipper will be charged extra to make up the difference. The receiver will be charged extra if the shipper must pay more for the cost of moving the freight in order to cover their increased expenses.

1.2 A description of the issue

On Thursday, March 11, 2021, the Petroleum Products Pricing Regulatory Agency (PPPRA) made the announcement that the Nigerian government had hiked the price of gasoline at the pump to N212.61 per litre. The agency states that the landing cost is N189.61 per litre, but fuel depot owners will sell to marketers for N206.42, according to Premium Times.

While the NNPC addressed the rumors by issuing a statement through its Group General Manager, Group Public Affairs Division, Kennie Obateru, Nigerians still believed that the government would increase the price of fuel because depot owners were reportedly hoarding the product and raising prices in anticipation of the increase.

It will become more difficult for the average Nigerian to afford food and other basic needs as fuel prices rise, especially without an increase in their income. Other basic needs of Nigerians, like transportation and the cost of goods and services, are also anticipated to rise in price.

Since then, Nigerians have expressed their displeasure with the move on social media using the hashtag #FuelPriceHike, with some calling for a protest in Ojota, Lagos State. On their social media accounts, many Nigerians have been lamenting that their country no longer uses coins and that, with the price of gasoline rising to N212.61 per liter, it will be difficult for them to check their account balance whenever they buy gas. Fuel cost 0.5 kobo per liter in 1978. The #FuelPriceHike is currently a significant economic issue for Nigeria, particularly for the common Nigerian. Thus, the goal of this study is to ascertain how Nigeria’s transportation sector will be affected by the increase in fuel prices in 2021.

1.3 Purpose of the investigation

This study’s primary goal is to look into how Nigeria’s transportation system is affected by rising gasoline prices by employing Ascent Transport Company (ATM), Abuja, as a case study. The study’s specific objectives were to

Analyze the impact of the fuel price increase on ATM passengers in Abuja.

Examine how the increase in fuel prices has affected the ATM in Abuja’s profitability.

1.4 Research Prompts

1. How does the increase in fuel prices affect ATM users in Abuja?

2. How has the increase in fuel prices impacted ATM Abuja’s profitability?

1.5 Research suppositions

In this investigation, the following null hypothesis will be examined:

Increased fuel prices have no impact on ATM, Abuja passengers.

The profitability of ATM, Abuja is unaffected by the increase in fuel prices.

1.6 Importance of the research

The results of this study will help the Nigerian government see the necessity of implementing policies to subsidize fuel in the nation and prevent needless price increases. This study will assist transportation firms in developing a sound plan and technique to permanently address the problem of fuel price increases in the near future. The general public will also be made aware by this study that transportation costs often increase whenever fuel prices rise in the nation. This study will also be used as a reference work for subsequent studies in this or associated fields.

1.7 Study’s purview

The purpose of this study is to determine how the increase in fuel prices has affected ATM, Abuja, passengers. Additionally, this study will look at how the increase in fuel prices has affected ATM Abuja’s profitability. The participants in this survey will only be ATM Abuja employees.

1.8 Study’s limitations

The main obstacles that the researcher faced while doing this study were money, time, and suitable materials.

1.9 Terms explained

A change that happens as a result of an activity or other cause is called an effect.

Price Hike: an abrupt or significant rise in costs, fees, taxes, or quantities.

The movement of people, animals, and products from one location to another is referred to as transportation.

References

Climate Change (2007): Mitigation, by Ribeiro, S. K., Kobayashi, S., Beuthe, M., Gasca, J., Greene, D., Lee, et al. The Fourth Assessment Report of the Intergovernmental Panel on Climate Change, which Working Group III contributed to. In Transport and its Infrastructure, edited by Cambridge University Press, published in 2007 in Cambridge, UK, and New York, NY, USA.

Evelyn, A., Ruamsook, K., and D. Russell Coyle The Real Effects of Expensive Transportation. 2014’s first quarter of Supply Chain Quarterly. Retrieved from “tandf.co.uk/ journals/authors/style/reference/tf_APA.pdf”

Oil Price Shock and Malaysian Sectoral Stock Market Return by Noordin, N. S. S. University of Malaya, 2009, doctoral dissertation. Retrieved from Syahira-MBA.pdf at http://repository.um.edu/my/889/1.

Factors Affecting Diesel Prices, U.S. Energy Information Administration, 2017. This information was derived from https://www.eia.gov/energy explained/index.cfm?page=diesel_factors_affe cting_prices.

Studies in Economics and Finance, Vol. 25, pp. 131–145, McSweeney, E. J., and Worthington, A. C. (2008), “A Comparative Analysis of Oil as a Risk Factor in Australian Industry Stock Returns, 1980–2006.”

The Impact of Oil Price Fluctuations on Transport and Related Sectors by Casamassima, Fiorello, and Martino. European Union Parliament. The document was retrieved from http://publications.europa.eu/resource/cellar/5 9b332d0-6bd2-4999-8fd6-6f939ab7d1f7. 0001. 02/DOC_1.

Impact of High Oil Prices on Freight Transportation: Modal Shift Potential in Five Corridors, Transportation Economics and Management Systems (TEMS) Inc. (2008). The information was retrieved from https://www.marad.dot.gov/wp-content/uploads/pdf/Modal_Shift_Study_-_Technical _Report.pdf.