Crude Oil By-Products Price Movements and Standard of Living: Evidence from Nigeria

Abstract
Crude oil deposits have occasioned over-dependence for most Nigerians, forming a single, high-valued commodity as a primary source of earnings exposure. Nevertheless, crude oil product prices are highly volatile. This study analyzed the impact of changes in the prices of crude oil by-products price movements on standard of living in Nigeria from 1989 to 2021. The changes in crude oil product prices are disaggregated into costs of oil price per barrel movements (OPBM), Diesel Pump Price Movements (DPPM), Petroleum Pump Price Movements (PPPM), and Kerosene Pump Price Movements (KPFF), while the regressed per capita income as a proxy for living standards in Nigeria. The data were analyzed using econometric methods, specifically the Unit Roots tests, Fully Modified OLS (FMOLS) Granger causality test and Generalized Method of Moments (GMM). The result established that OPBM- Oil Price per Barrel Movements and Petroleum Pump Price Movements reduce per capita income significantly while KPPM- Kerosene Pump Price Movements minimally reduce per capita income. However, DPPM- Diesel Pump Price Movements improve per capita income minimally. The study concludes that the overall reliance on crude oil is behind the improvised state of Nigerians. To reduce Nigerians’ (especially OPBM and PPPF) dependence on crude oil by-products, mostly OPBM local pump prices should be lowered. Again, the government should re-direct its revenue towards improving the standard of living. The study is novel as it provides a robust economic policy model linking crude oil by-products and Nigeria’s living standard.
Keywords: Diesel Prices, Kerosene Prices, Oil Prices, Petroleum Prices.

Author(s): James Ese Ighoroje*, Chiyem Okorie, Kelvin Agbarha Egberi
Volume: 5 Issue: 4 Pages: 378-391
DOI: https://doi.org/10.47857/irjms.2024.05i04.01358