Mutual Trust in Employment Contracts

Mutual Trust in Employment Contracts Introduction In all the employment contracts a term mutual trust and confidence which is also known as the duty to act reasonably and fairly is implied or not is the question for over the past years. As per the labor regulations in Australia, different range of sources provides different rights and responsibilities of employers and employees, which also creates a huge different level of complications while going through these sources. These terms will generally be implied in an employment contract in Australia that has been widely acknowledged, but at the same time the debate on awarding the damages for a breach of these terms in some of the Australian courts will be challenging as well. Contract Contract is a legal document that states and explains a formal agreement between two different people or groups, or the agreement itself.[1] There are two kinds of contract and they are Express and Implied contract. Express contract is a type of contract which parties state the terms either orally or in writing at the time of its formation. On the other hand implied contract is a contract where terms and condition are not expressly defined at the time of its formation.[2] Employment Contract Employment contract is a category of contract, which used in employment. It is a relation between both parties on the one and stands an employee who is employed by an employer. It contains all terms and condition regarding employment.[3] Mutual Trust and Confidence in Good Faith Analyzing the concepts is very much necessary when it comes to â€Å"breach of mutual trust and confidence† and â€Å"the duty of mutual trust and confidence†. There is a lot of difference between the duty of good faith and the mutual trust and confidence. One talks about the implied duty that will relate to the terms of the contract and the relationship and whereas other talks about the incident of the employment relationship (right to Control). [4] When it comes to incident of the employment relationship, there comes a question whether the relationship of trust and confidence exists or not. Which totally depends on the nature of the employment. So there is a doubt that it has existed and continues to exist, a necessary relationship of trust and confidence between employer and employee. In an employment relationship the subsistence of mutual trust and confidence is very much essential to it. Because the employer cannot accept disloyalty of an employee who has undermine the employer’s business interest.[5] So the employee should not remain with the employer in employment because the employee has destroyed the trust and confidence in the working relationship. Employee’s destruction of trust can be evidenced by different types of conduct and which also depends on the circumstances of the employment. Some of the examples of different types of conduct, which may destroy the trust and confidence, are: demotion;[6] unwarranted carping criticism;[7] withdrawal of employment benefits.[8] It was first originated from the series of cases in the United Kingdom, in which employees totally blame employers for termination of their employment; despite this employers did not expressly dismiss these employees.[9] If any employee can make out that the employer’s conduct was so destructive of mutual trust and confidence, which properly ties up the parties to an employment relationship, than the employee treats employer’s conduct as constructive dismissal. In terms of contract law, employer’s conduct is treated as a repudiation of the employment contract by the employee as they are permitted to do so and elects to terminate the contract and claim damages for wrongful dismissal. On this basis in many of the cases, employee was seeking to claim statutory compensation for termination under the Employment Rights Act 1996 (UK) c 18.[10] Into the English employment law, duty was cemented by the decisions of House of Lords for example in Malik v Bank of credit and Commerce International SA (‘Malik’).[11] This was actually the test case for determining whether the breach of the duty is not to destroy mutual trust and confidence that could sound in damages. So it was held that mutual trust could sound in damages during employment as a consequence of the employer’s breach, that is why following this decision, not to destroy the mutual trust has been engaged to address a wide variety of claims. For example, in Clark v Nomura International Plc[12] and Clark v BET plc[13] So in the development of this duty in English law, which actually came from the decisions of a majority of the House of Lords that breach the common law duty of mutual trust, good faith and fair dealing would not sound damages until the damages flow from only the termination of the employment relationship. So to overreach the limitations already determined by statute,[14] the House of Lords held the common law not to be developed. Since in the United Kingdom the legislation has already imposed a cap on damages for termination of the employment, and also exercising the common law jurisdiction should not award damages that exceed the statutory limits for termination. To compensate for any losses incurred by the employee, damages might be awarded as a consequence of breach of employment contract during employment, but also not for any loss surffered as a consequence of loosing the job.[15] English scientific study of law has allowed damages for breach of the obligation that is not to destroy the trust and confidence, but even not when the damage flowed from the fact or manner of dismissal. Most importantly, in the English Law ‘the giving of the lawful notice cannot itself constitute a breach of the implied term.’[16] When it comes to Australian case law it has generally assumed that duty has been existed not to act in a manner or likely to destroy the mutual trust and confidence when it comes to employment relationship,[17] though no appellate court decision has depended upon such a findings.[18] Both parties to an employment relationship bear the duty not to destroy the mutual trust and confidence has assumed by the Australian courts in more recent times. When it comes to the English law, destruction of mutual trust signifies to the situation in which employees refuses to do something that are legally required to do as per employment contract and than identifies who is to be blamed if termination of the contract ensues. But whereas in Australian law, destruction of mutual trust and confidence has not been found to sound any damages on its own. In Australian case law it distinguishes between the employment relationship and employment contract.[19] The employment relationship is nothing but the actual dealing between employer and employee regulated by different types of law that includes common law of contract and also statutes that impose the mandatory obligations on the parties.[20] Whereas in terms of employment contract it is not automatically terminated when there is dest ruction of relationship of trust, but by electing innocent party.[21] In such circumstances the employees who gets terminated are entitled to be paid any remuneration or some other benefits according to his or her loss of account of premature termination of the employment contract.[22] This also means the payment of remuneration and other benefits that would have been received during a proper notice period. More importantly, the obligation not to destroy the mutual trust does not constrain an employer to take the decision to terminate the employment. So as long as the employer brings together the terms of the contract, and without prior notice and explaining how it should be done the employer is not at all liable for breaching the employment contract simply by deciding to terminate the employee.[23] Australian law has not gone so far unlike the English law, where the obligation is not to destroy mutual trust and confidence with a general duty of good faith and fair dealing in the employment contracts, in which breach might sound in damages. In some of the Australian cases there are few suggestions that on one hand there is two obligations of mutual trust and confidence, and on other hand the good faith, are having nearly the same meaning and these statements tend to be made by the courts who have found to decide upon the matter without any obligations.[24] According to Russell (Appeal) in 2008 â€Å"Although there were said to be two implied terms, it is probably sufficient to identify them as a single obligation.† [25] They derive from the same source, as siblings, that show the existence of a relationship of employment but again to understand it in the better way make it the separate concepts of each of them and with different functions. It is just a matter of choosing a vocabulary to assist in the clear articulation of separate concepts. The terminology of ‘mutual trust and confidence’ is very useful to describe in a particular characteristic of an employment contract that distinguishes it from a contract of sale or other contractual arrangement. Also ‘good faith’ is described as governing principle that is best engaged in interpretation and construction of relational contracts such as employment. Commonwealth v Barker It was in the year 2009 where the Commonwealth Bank of Australia took a step forward to change its Corporate and Financial Services business unit, due to which Mr. Barker’s position in the Bank was removed. As per the policy of the company, if they don’t require any position of the employee they will need to place that concern employee to the other part of the department or other position in the company. But in the case of Mr. Barker the Commonwealth Bank did not imply this policy. On 2 March 2009 Mr. Barker was send a letter to inform him about the redundant of his position but the Bank would like to send him to other area of the Bank. Later there was a meeting where Mr. Barker was told to clear out his desk, give away the keys and mobile phone and not to come to work. The Bank also stops Mr. Barker’s email and intranet facilities. On 9th April 2009, Mr. Barker was sent a letter of termination due to his redundancy and there was no sign of redeploy for Mr. Barker by the Bank. Mr. Barker had given his 23 years in the Bank and his contract of employment showed that he would be terminated only if the Bank is unable to give him a different position but there was no proper word in the contract apart from potential operation of an implied term of mutual trust and confidence. Mr. Barker’s file the case to the trial judge against the Commonwealth Bank and that included the failure of the Commonwealth Bank to give him the employment in some other department of the Bank.[26] What the Bank did to Mr. Barker was not according to the term of the contract of employment. As per the contract there should be mutual trust and confidence between employer and employee but that didn’t work at his time his employment. The policy of the company for redeployment was not utilized at his case of redundant of his position. Mr. Barker was entitled $300,000 from the bank for not following the company’s policy of redeployment. The case was then requested to the Federal Court as the Bank felt the Trial judge has made mistake in giving justice without any proper evidence. The courts refused to accept the appeal as Mr. Barker was more favorable and for this reason Jacobson and Lander JJ were appointed to go through the case in detail under Australian Law. [27] They came to the conclusion on the following grounds: In the court of England the policy support the implied term with the contemporary employment relationship.[28] The employment relationship should take part necessary of common interest and partnership fairly than a serious disagreement or argument.[29] These typical parts called for the result of an action or a decision by law of an obligation, for which employment relationship need to be in its original state.[30] According to the majority, the implied term only work in a particular way in respect of conduct and form a unit by it from the manner of termination of the contract of employment that is, it does not apply at the point of dismissing someone from their job or to steps inextricably linked with dismissal.[31] It was easy to see or understand from their reasons for decision that Jacobson and Lander JJ held that the implication of the implied term by law was necessary For Jacobson and Lander JJ, the Bank’s failure to give redeployment policy was not the important factor. As they found the Bank has not implied term or made something happen: Mr. Barker was a senior employee and worked for more than 23 years. The Common wealth bank was a large corporate organization and The contract (clause 8) contains that the employment may be terminated if the Bank were unable to place the employee in other position.[32] In these conditions of the facts, Jacobson and Lander JJ held that the implied term required the Bank to take positive steps from 2nd March 2009 to advice Mr. Barker about the possibility of redeployment and to give him the option to apply for alternative position within the Bank. [33] Jacobson and Lander JJ confirmed that Mr. Barker has been gone through hurt and distress and even loss of reputations that can never be recovered.[34] As an alternative reason for holding the Bank was liable, Jacobson and Lander JJ found that the same circumstances triggered the operation of the implied tasks of the organization in the contract of employment.[35] This implied the state of being forced upon the need for one party to take positive steps without which the other party is unable to enjoy a right or to be in a better position because of the contract.[36] By comparing the case where an employee despite to be knowing for the benefit unless it is brought to his attention by the employer. [37] After paying great attention to details and had judgment in which he completely study the gradual development of English and Australian case law in relation with the implied term of mutual trust and confidence, Jessup J concluded that: â€Å"the question whether the implied term is part of the law of contracts of employment in Australia has never been answered in the affirmative by an Australian appellate court in the sense of being of the ratio decided.†[38] His Honor went onto hold that the implied term of mutual trust and confidence was not needed for the pleasure of the rights conferred by the contract of employment.[39] Jessup J described the implied term as having â€Å"the potential to act as a Trojan horse in the sense of revealing only after the event the specific prohibitions which it imports into the contract.†[40] His honor makes a decision that the implied term, if accepted, â€Å"would enable defined limits in the existing fabric of common law and equitable remedies to be side-stepped†; and that the implied term would â€Å"overlap a number of legislated prohibition and requirements, thus tending to compromise the democratically-drawn architecture† by closely connected with the employment obligations.[41] Jessup J further held that the fact of being express reservation in the Bank’s redeployment policy â€Å"did not †¦leave any scope for the conclusion that by merely failing to comply with the policy, the Bank breached the implied term.†[42] The largest part of the case was in favor of Mr. Barker and at least for now, that in the period of time when express terms to the contrary is away, there is an implied term of mutual trust and confidence in every Australian employment contract. The decision moved to a higher level for consideration if the employers should clearly deliberate the implied term from employment contract. To whatever degree, it won’t be too complicated as given: As far as possible giving particular attention to the implied term, and The way of dealing by the majority judges, that particular circumstance triggered the operation of the implied term. The majority decision is turned upside down by the High Court of Australia on appeal; employers now need to put the implied term of mutual trust and confidence and the implied duty of cooperation to their list for them to remember all the time. In addition to the matters such as rise in the adverse action claims in dealing with their employees. When it comes to advantages and disadvantages for employers and employees of having such an implied term in the employment contract, employees should always remain faithful and sincere to the employer’s interest. Any confidential document or information of the company should not be shared outside the workplace to its competitors and it should remain internal within the workplace.[43] Whereas employers make decisions from the policies so they have to pay extra attention to its policies and regulations. In Barkers case federal court advised the employers to conduct themselves in a way that it wont destroy their relationship of trust and confidence with employee. When it comes to common law employers have to make sure that workplace is a safe place for employees to work. Employees have a huge advantage in having the implied term mutual trust and confidence because if there is a severe breach in the employment policies which is found than through the award of damages by the court, it will not only be considered a breach of an implied term. Conclusion In my view the term mutual trust and confidence is very much important to be implied in the employment contract. Because having the term mutual trust and confidence in the contract will create a comfortable working environment and also conditions can be achieved between both employer and employee. Incase if such implied term is not reflecting in the employment contract than either the employer or the employee would be permitted to act in a way that is not necessarily in accordance with the will of the contract. And also the practice of obeying rules between employer and employee are included in the viewpoint of an implied term. [1] Cambridge Advance Learner Dictionary (3rd Editioin) [2] ibid [3] Mark Freedland, the personal employment contract 2003 Oxford University press. [4] Gillies v Downer EDI Limited [2011] NSWSC 1055 [5] Concut Pty Ltd v Worrell (2000) 176 ALR 693. [6] Russian v Woolworths (SA) Pty Ltd (1995) 64 IR 169. [7] Lewis v Motorworld Garages Ltd [1986] ICR 157. [8] Clark v Nomura International plc [2000] IRLR 766. [9] Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84. [10] Lewis v Motorworld Garages Ltd [1986] ICR 157. [11] [1998] AC 20. [12] [2000] IRLR 766. [13] [1997] IRLR 348. [14] Johnson v Unisys Ltd [2003] 1 AC 518, 544 [56]–[58] (Lord Hoffmann). [15] Gogay v Hertfordshire County Council [2000] IRLR 703. [16] Kerry Foods Ltd v Lynch [2005] IRLR 680, 682 [16] (Clark J). [17] Sappideen et al, above n 10, 162 [5.230] and the cases cited there. [18] Aldersea v Public Transport Corporation (2001) 3 VR 499. [19] Visscher v Giudice (2009) 239 CLR 361. [20]Byrne v Australian Airlines Ltd (1995) 185 CLR 410. [21] Visscher v Giudice (2009) 239 CLR 361. [22] Thomson v Orica Australia Pty Ltd (2002) 116 IR 186. [23] Russell (Trial) (2007) 69 NSWLR 198; Rogan-Gardiner [2010] WASC 290 (22 October 2010). [24] Russell (Appeal) (2008) 72 NSWLR 559, 567 [32], [25] ibid [26]Barker v Commonwealth Bank of Australia[2012] FCA 942 (3 September 2012). [27] 2013] FCAFC 83 at para [79], [28] 2013] FCAFC 83 at paras [94]-[95], [29] [2013] FCAFC 83 at para [81], referring to the Full Court of the SA Supreme Court decision inSouth Australia v McDonald(2009) 104 SASR 344 [30] [2013] FCAFC 83 at paras [72], [107]. [31] [2013] FCAFC 83 at paras [72], [97]. [32] [2013] FCAFC 83 at paras [110]-[111]. [33] [2013] FCAFC 83 at paras [112], [117], [130]-[132]. [34] 2013] FCAFC 83 at paras [152]-[158]. [35] 2013] FCAFC 83 at paras [118]-[128]. [36] 2013] FCAFC 83 at para [122]. [37]As in the House of Lords decision inScally v Southern Health and Social Services Board[1992] 1 AC 294, discussed by the majority inBarker[2013] FCAFC 83 at paras [114]-[115], [123], [128]. [38] 2013] FCAFC 83 at para [280 [39] 2013] FCAFC 83 at paras [288]- [295], especially paras [289]-[290]. [40] 2013] FCAFC 83 at para [340]. [41] 2013] FCAFC 83 at para [340]. [42] [2013] FCAFC 83 at para [351]. [43] Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd (1967) VR 37.

A letter to Dr. King

I hereby write this letter to emphasize on the step that you have taken that will make a great history to the American society and on the social issues that are highlighted in the letter.Being the president of the Southern Christian Leadership Conference (SCLC) you have the mandate and authority to talk on the injustice which is developing in many states like Birmingham. It is known that injustice is a threat to justice everywhere and this should provide a reason for your actions. More so, we should understand that whatever affects one affects all of us because we are tied in a single garment of destiny.There are many demonstrations going on at Birmingham that should be taken care off by first collecting the facts on whether injustices exist or the use of direct action, all this involves a non-violent action. This city is mostly segregated in United States with the Negros receiving unjust treatments in the courts. This is even worse as many homes for the Negros have experienced more bombings which even extend to their churches.These demonstrations are more so necessary at this moment because of the trend of economy. This is the time when there shall be a strong economic withdrawal program as a result of the direct action, the time when the merchants shall be in need for change.It is necessary to put direct and indirect action towards demonstrations in Birmingham because; this can create a situation that can bring about an open door for negotiation. More so still the Birmingham administration shall not be allowed to act because it must first be prodded before it starts to act. From the past, it has been seen that there has not been any gain without using a determined legal and nonviolent pressures. Therefore, there is need to get engaged in the direct-action campaign because we know that justice that is delayed too long is simply justice denied.The American community has waited for a long duration without having the constitutional and God-given rights which mean s there is a slow down in gaining political independence. Therefore, people have increased their anxiety to break laws which are unjust. This is because of the existence of two types of laws which are just and unjust laws. Unjust laws are those that degrade the human personality like the segregated statutes or just arresting a charge of parading without permit which is used for example to maintain segregation and deny citizens a peaceful assembly and protest.Another major social concern that you expressed in the letter is recognition of the importance of law in a country. That is it exists in order to establish justice and that if violated we are likely to become a dam that is dangerously structured for the purpose of blocking social progress. I certainly do not support this because the whites seem to have a low regard of the existence of law.This is the main limiting factor to establishment of justice in the legal systems. It has however been expected that the oppressor race shall be at least understand the needs of the oppressed race which is just but a dream a reason as to why the oppressed should be strong, persistent and determined for action.I still feel that the church has some inner strong power to take care of the oppressed race which has been an inverse in the present times. But lack of will has made it weak and has had an ineffectual voice that is unable to perform its duties.

The Life And Death Of Satire - 2426 Words

The Life and Death of Satire The Encyclopedia Britannica describes satire as, â€Å"an artistic form [and] is one of the most heavily worked literary designations, and one of the most imprecise.† (â€Å"Satire†). This definition shows that satire has had time to grow and has been changed over time to encapsulate an entire genre of literature. One of the earliest satires was â€Å"The Frogs,† by Aristophanes the Greek playwright. â€Å"The Frogs† is a play that focuses on Dionysus, and his travels into the underworld to get the famous playwright Euripides back from the dead. With growth comes broadening and change, with works such as A Modest Proposal by Jonathan Swift, or Candide by Voltaire. A Modest Proposal is an essay that creates a horrifying and inhumane way to deal with poverty, which was rampant at the time. Candide is Voltaire’s satirical adventure novel that has the incompetent titular character travel the globe to regain his beautiful love. Satire then expands and i ncorporates more modern people and popular events. It has even grown to incorporate the satirization of deep philosophies and organizations with Catch-22 by Joseph Heller, or Cat’s Cradle by Kurt Vonnegut. Catch-22 is the dark comedy that looks at the autonomous and heartless bureaucracy that our government and army have become. Cat’s Cradle is a dark look at hope, and how we as people may lie to ourselves and others, in order to enjoy hope. Satire is an art that has expanded over time, from the early satires to theShow MoreRelated Contrast Between Satire in The Rape Of The Lock and A Modest Proposal1679 Words   |  7 PagesContrast Between Satire in The Rape Of The Lock and A Modest Proposal   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Although Alexander Popes, The Rape Of The Lock and Jonathan Swifts A Modest Proposal are both witty satires, they differ on their style, intention, and mood. 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Essay on Foreign Policy Recommendations for the Obama...

After December 26 1991, when the Soviet Union fell, the bipolarity of the international system was effaced. In the post- Cold War era, the United States faced the problem, without a defined enemy, to adopt a new foreign policy. To begin to analyze the political foreign policy of the United States, one must first understand the international system. According to Political Realism, a theory of international thought, the state is the key unit within the acts within the system. These states act according to their key norms, which are allowed by the system. However, these sates are also affected the domestic and external factors which control how they act. The domestic factors include political culture, their economic system, the leadership†¦show more content†¦After the collapse of the Soviet Union, the United States was the unquestioned hegemon of the western world acting in a unipolar world. However, recently the United States has fallen into a series of deprival causing its r eputation to fall as a state. Despite this, under the Bush Doctrine, the United States currently has a preemptive hegemonic imperative policy. Under this policy, the United States takes into account that the world is a perilous environment in need of a leader to guide and to control the various rebel states unipolarly. Under this policy though, the United States acts alone with no assistance from other states or institutions. Global intuitions that would assist under other types of policies are flagrantly disregarded in this policy in spite of its emphasis on the international level. As well as not participating in international institutions, this policy states that the United States should act entirely in its own wisdom. The UN (the United Nations), GATT (General Agreement of Tariffs and Trade), along with other institutions advice is not heeded within this self-made policy. Though the United States currently acknowledges these global organizations, it no longer takes them into acc ount with severity. Instead of acting under the international system, the United States currently acts through its military, and large economy to instill fear within the various actors in the intercontinental system. According to this philosophy theShow MoreRelatedThe National Security Act Of 1947 Centralized Command And Promoted Intelligence Sharing Between Institutions1591 Words   |  7 Pagesadvise the President on â€Å"domestic, foreign, and military policies relating to the national security.† The NSC acts as a coordinator between departments and agencies across government, and relies on accurate and insightful reports from them to develop national security policy recommendations for the President. The NSC is unique because it both consumes intelligence to make recommendations to the President, and guides intelligence activities by coordinating policies across government. 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Essay on Foster Parenting in Nebraska The Victims...

Having previously been a foster parent here in Nebraska, I knew immediately where I wanted get my information for this Victims Advocate Project. Having worked directly with the Child Advocacy Center in Lincoln with some of my former foster children, I was happy to get into contact with its executive director, Lynn Ayers. Lynn has been working in victims advocacy, particularly as a children and family advocate for over 36 years, and has a wealth of knowledge on the subject. In her time in this field, she has seen a variety of cases and was more than happy to respond to my request for an interview via e-mail correspondence. The Child Advocacy Center is located in Lincoln, Nebraska, and is a non-profit organization providing a safe,†¦show more content†¦The Child Advocacy Center also helps with gaining protection orders, writing victims impact statements, and filling out Crime Victim Compensation applications. Victims and their families are also referred to a variety of ser vices in the community such as food and legal assistance, emergency housing, and counseling. The center has therapists from the University of Nebraska Psychology Department Project SAFE and Lutheran Family Services available on-site for all victims. With over three decades of experience as a victims advocate specializing in minor children and their non-offending parents, Lynn has helped lead a great number of children and families toward healing and justice. She states that the job is very demanding and can be draining. She states, Its sometimes difficult to walk out the door and leave the job at work. You think about a child or a situation and worry, are they okay? Lynn said that she always wanted to do her very best at her job, but also had to remind herself that she had her own family and children at home that she needed to be there for. She stressed the importance of finding a good balance of both and identifying and maintaining a healthy support system outside of work. In her work, Lynn Ayers has witnessed the first-hand effects of child sexual abuse. She stated that the most difficult part of her job has been hearing firsthand the abuse suffered byShow MoreRelatedStephen P. Robbins Timothy A. Judge (2011) Organizational Behaviour 15th Edition New Jersey: Prentice Hall393164 Words   |  1573 PagesSingapore Taipei Tokyo Editorial Director: Sally Yagan Director of Editorial Services: Ashley Santora Acquisitions Editor: Brian Mickelson Editorial Project Manager: Sarah Holle Editorial Assistant: Ashlee Bradbury VP Director of Marketing: Patrice Lumumba Jones Senior Marketing Manager: Nikki Ayana Jones Senior Managing Editor: Judy Leale Production Project Manager: Becca Groves Senior Operations Supervisor: Arnold Vila Operations Specialist: Cathleen Petersen Senior Art Director: Janet Slowik Art

The Role of Climate Change on Our Nation’s Infrastructure System Free Essays

string(66) " swerve our oil use, co2 emanations, and increase productiveness\." The Role of Climate Change on Our Nation’s Infrastructure System Introduction: Infrastructure plays a critical function in everybody’s day-to-day life, but most people don’t recognize merely how extended that function truly is. Whether it’s going from one topographic point to another, utilizing power, imbibing tap H2O, or blushing a lavatory substructure helps us populate our lives to the criterion that we have become used to and maintain our economic system traveling. There are many factors that need to be considered when measuring the current and future province of substructure wellness. We will write a custom essay sample on The Role of Climate Change on Our Nation’s Infrastructure System or any similar topic only for you Order Now One factor is the consequence of a altering clime, but it is hard to gauge merely how it will impact our substructure system since its hereafter impacts can merely be loosely anticipated. In this paper I will look into the function substructure plays in the aiding and deterring of clime alteration, the current and future province of our substructure and how climate alteration can impact it, and possible solutions through invention in policy and support to assist minimise the effects. History of Support: Ever since President Woodrow Wilson signed the Federal-Aid Road Act in 1916, the nature and extent of the federal authorities in the edifice, maintaining, and support of the corporate states surface substructure system has been broad ranging. The 1916 act launched the Federal-Aid Highway Program, every bit good as presenting the States with grants to assist in the building of roads that would be used in mail bringing. The mandate of the National System of Interstate and Defense Highways and the creative activity of the Federal Highway Trust Fund in 1956 marked a dramatic heightening of the Federal governments’ impact in the creative activity of the nation’s roadways by making the model for a national route system and a support system for roads to be created [ 1 ] . The basic construction for federal support of substructure was set up so that federal financess could be granted to the States by undertakings submitted for blessing, and so if the programs were approved for the financess they would have a part of cost, and the remainder of the support is required by the State and local authoritiess that need the undertaking completed [ 2 ] . Since so most federal support has been granted though extensions of old Acts of the Apostless and the procedure of how assistance is given has remained largely unchanged over this clip. A cardinal ground for the age of many substructure systems is due to the aggressive disbursement on substructure that was initialized in the late 1930’s through the early 1940’s by President Roosevelt, normally referred to as the New Deal Programs, which used big sums of federal financess to make the footing of many of our roadway and electrical systems. Much of the substructure built during this clip has non been undated since it was originally built. The sum of support for substructure has varied over clip but it has been at a degree under what it needed to be at to supply a strong and efficient system. Through history there has been a spread between what was needed for substructure and what was really spent. On mean merely about 2.4 % of our GDP is spent on substructure in America. To compare, Europe spends about 5 % and China spends about 9 % of their GPD on their substructure. This deficiency of disbursement and development in substructure has led to our current ranking of 15Thursday, out of the 32 OECD states, in footings of our overall satisfaction of our roads and main roads [ 2 ] . Current province of Infrastructure: The systems of substructure in America are presently in one of the poorest provinces in the country’s history. The American Society of Civil Engineers ( ASCE ) release a study card rating at least 12 of the country’s substructure systems every four old ages traveling back to 1998, in that clip they have released 5 study cards with the most recent being in 2013. The overall GPA of our country’s substructure has been given a class of D three times and a D+ two times, with the 2013 study card giving a D+ . A hapless and inefficient substructure system is non merely insecure, but it besides exacerbates fuel and energy ingestion, creates extra injury to the environment through pollution and taint, and besides wastes people’s clip and money. ASCE estimates that the sum of support needed to increase each class to a class of a B, considered to be in a ‘good’ province, by 2020 is $ 3.6 trillion. However, the estimated support by 2020 for all the classs is estimated to be merely about $ 2 trillion, go forthing a $ 1.6 trillion support spread which will surly take to an substructure province that is at a comparable degree that we see now [ 3 ] . With an expected substructure province to stay in hapless conditions, an added challenge in the appraisal of future impacts by clime alteration on substructure arise when finding how pieces and parts that are already stressed and aged will react to climate alteration. We can analyze how new parts will respond by preforming trial in labs to imitate clime alteration effects on them to see how the rates of impairment could perchance play out over clip, but seeking to detect how fast the altering rates of parts that have been used over the past decennaries is difficult to precisely quantify. Infrastructure and Climate Change: Infrastructure plays a big function in our nursery gas emanations and depending on the conditions of the system it can either assist us in the chase of diminishing emanations or it can be an added releaser of emanations. Many of the solutions to the jobs in our substructure system besides have the potency to assist out other jobs in the system every bit good as to assist diminish our usage of fossil fuels. An efficient transit substructure system is critical to assist swerve our oil use, co2 emanations, and increase productiveness. You read "The Role of Climate Change on Our Nation’s Infrastructure System" in category "Essay examples" Traffic congestion on roads consequences in 1.9 billion gallons of gasolene to be burned per twelvemonth, and the costs to drivers is over $ 100 billion in wasted fuel and lost clip. A new and efficient air traffic control systems we would salvage around 3 billion gallons of jet fuel a twelvemonth from being wasted [ 1 ] . On the other manus if w e increase people’s ability to use public transit and mass transit services the positive effects could ruffle through many countries of transit and public wellness. Increased usage of public and aggregate transit would assist to maintain autos off the route, particularly during peak transposing times. This would hold the consequence of non merely cut downing traffic conditions, which would assist to relieve some of the otiose gasolene that’s burned while waiting in traffic, but to besides halt the combustion of gasolene by all the people who normally drive a auto. With less people really on the roads, the conditions of the roadways will be maintained for a longer clip, which once more has the consequence of cut downing traffic and wasted gas burned while waiting in traffic. Plus, taking more autos off the route during the early hours should assist to cut down the sum of smog formation in some high-dense metropoliss. Most of the effects of clime alteration will hold some impacts on different countries of the substructure system. A big factor to the substructure system is the addition in big precipitation events, an addition in planetary sea degrees, and the addition in utmost conditions events [ 4 ] . With increasing events of big precipitation our dikes, imbibing and waste H2O systems, and levees will all be subjected to new stressors that can worsen the procedure of early weakness and pre-mature impairment [ 5 ] . Sing the mean age of all the states dams to be 52 old ages old, and that approximately 17 % of them are considered high risky, the emphasis from the addition of flows coming in from affiliated H2O ways added to the addition of heavy deposits that big precipitation events bring into the H2O system which hurt the overall wellness of a dike, their length of service is expected to diminish. The imbibing and waste H2O systems is expected to endure from many of the same emphasis as dike wil l, except the excess H2O will besides be coming from our sewerage system so that big urban countries will see big impacts from the high sum of paving that helps funnel excess sums of H2O into the system. Large sums of precipitation and the addition of the sea degree will stretch our levee system with added stressors that can give a possible harmful failure that could be every bit annihilating as a dam failure. Both dikes and levees hold back H2O that could potentially deluge most of the coastal and low lying countries. Extreme conditions events are the chief causes for many of the energy grid power breaks. Breaks can be caused from knocked over tree limbs on power lines, implosion therapy of transmittal Stationss, to the devastation of grapevine subdivisions [ 3 ] . In America, our substructure is presently in an abysmal province, and with support for the hereafter projected to hardly cover half of what it will take to convey it into a good province it is safe to state that it will go on to let down. Decision and How to Continue: The chief stressors associated with substructure development are from the continual lacking of support and an overall absence of a big scale leading function in footings of establishing when and what undertakings are taken on so to most expeditiously finish staying undertakings so that their benefits will assist other unfinished undertakings or won’t be negated because of unfinished undertakings. All of the systems of substructure are connected ; the quality of H2O downstream of a river is effected by the quality that has been put out upstream and if a main road outside a metropolis has awful route conditions people and concern are less likely to go and devour in that metropolis even if the city’s roads have all merely been repaved. With this in head, the manner we choose the following set of undertakings to undergo demand to be picked with careful consideration to how its betterments will impact other undertakings still necessitating completed. The ability to implement this sort of planning is presently really hard though, because support is progressively being moved from big supervising body’s to smaller and smaller 1s. Federal support for substructure investings have been continuously shriveling over the past twosome decennaries which has led to the States, and progressively even more so the local and municipality authoritiess that are forced to come up with the support spread. With a lessening in centralisation of undertaking planning, along with an addition of undertakings that have to be delayed due to miss of financess that need to come from the fighting provinces budgets or till adequate financess can be raised by a local or municipality authorities, the ability now to integrate a program for phasing in different undertakings is acquiring progressively harder. When be aftering the range and particulars of a given undertaking factors such as sustainability, resilience, and the continual care and up-keep demand to be primary for any planning of substructure. The transit systems, H2O intervention systems, and flood control systems being built today must be able to account for both current and future challenges that are likely to be confronting them. Infrastructure needs to be built with future population motion in head as good, so when new systems are built or betterments are made to the bing substructure it needs to be able to manage tonss much greater than what it presently needed or a design for a system needs to be scaled so it’s merely responsible for a smaller population denseness. In add-on, funding for research and development at all degrees need to be implemented so the development of new and of all time more efficient methods and stuffs for the edifice and maintaining of substructure can go on. Future development besides needs to let for easier and cheaper betterments and ascents over the clip of its usage. Future care can be done more easy if they are built to let replacing over different clip intervals so that when it comes clip for the necessary betterments to be made it doesn’t demand to be all at the same clip. While funding demands to be increased from both private and public sectors, the users of the substructure demand to larn and besides pay the appropriate monetary value for them to utilize it. Mentions [ 1 ] ( 2012 ) â€Å"Highway Funding.† Congressional Digest. Volume 91, Issue 7, pp. 194, 195, 224. [ 2 ] ( 2012 ) â€Å"Surface Transportation Policy.† Congressional Digest. Volume 91, Issue 7, pp. 196-199. [ 3 ] ( 2013 ) â€Å"2013 Report Card for America’s Infrastructure.† [ 4 ] IPCC, 2007: Summary for Policymakers. In: Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working. Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. new wave der Linden and C.E. Hanson, Eds. , Cambridge University Press, Cambridge, UK, 7-22. [ 5 ] Hall, David. â€Å" Corps of Engineers ‘ Studies Will Inform Response to Climate Change. †Civil EngineeringJuly-Aug. 2013: 20-23. Print [ 6 ] IPCC, 2007: Summary for Policymakers. In: Climate Change 2007: Extenuation. Contribution of Working Group III to the Fourth Assessment. Report of the Intergovernmental Panel on Climate Change [ B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer ( explosive detection systems ) ] , Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. [ 7 ] IPCC, 2013: Summary for Policymakers. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [ Stocker, T.F. , D. Qin, G.-K. Plattner, M. Tignor, S. K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley ( eds. ) ] . Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. [ 8 ] ( 2011 ) â€Å"Failure to Act: The Impact of Current Infrastructure Investment On America’s Economic Future.† How to cite The Role of Climate Change on Our Nation’s Infrastructure System, Essay examples

Crude Oil Refining or Petroleum Product Importation Which Is Economical for Nigeria free essay sample

CRUDE OIL REFINING OR PETROLEUM PRODUCTS IMPORTATION: WHICH IS ECONOMICAL FOR NIGERIA? ABSTRACT: One of the most crucial challenges facing Nigeria is being able to meet the energy need of the energy hungry populace; the exponential population growth makes it even more challenging. The approach adopted to meeting this need has impacted severely on the economy of the nation as reflected in the year-on-year economic figures. This can be attributed to her choice of net importer of petroleum products status to the much more economic domestic refining option. This paper analyses the best economic option between refining crude oil and importing the products in Nigeria, at the end making probable suggestions. TABLE OF CONTENT ABBRECIATIONS 1. NTRODUCTION. 4 2. CRUDE OIL REFINING AND PETROLEUM IMPORTATION IN NIGERIA 5 2. 1 Overview 5 2. Challenges of Petroleum Product Refining in Nigeria 6 3. CRUDE OIL REFINING AND PETROLEUM PRODUCTS ECONOMICS .. 8 3. 1 The Economics of Crude oil Refining .. 8 3. 2 The Economics of Petroleum Products.. 9 4. CRUDE OIL REFINING, PETROLEUM PRODUCTS IMPORTATION AND THE ECONOMY. . 0 5. CONCLUSION 11 BIBLIOGRAPHY. 13 ABBREVIATIONS BPSD Barrels per Stream Day B/D Barrels per Day CBN Central Bank of Nigeria GDP Gross Domestic Product NNPC Nigerian National Petroleum Corporation NPRC Nigerian Petroleum Refining Company PHRC Port Harcourt Refinery Company 1. INTRODUCTION The role of crude oil remains key among the energy sources, hence we have to still live with the consequences that are associated with it, one of which is economical. This obviously is an aspect no country, importer and exporter have been able to overcome, though its impact on some countries is less than in others. Nigeria is definitely one of those countries whose economy has been monumentally impacted, ironically though, a leading crude oil producer and exporter in the world. However, this is not to take away crude oil’s enormous contribution to the Nigerian macro-economy over the years it holds sway. The discovery of oil in Nigeria was thought to be a big respite to the growing energy supply challenges facing her and to bring economical gains, especially as the price of oil has often been on the increase. Hence, should have made huge sums of money from it. Incidentally, this is not to be, as oil suddenly took shine off the hitherto major sources of the country’s GDP. Sectors like agriculture and manufacturing went moribund, making Nigeria a mono-economy, with oil being the mainstay of the economy. It provides 95% of foreign exchange earnings and about 80% of government budgetary revenues[1]. The Nigeria economy plays into the hands of the volatility of extremely vulnerable external shocks, particularly the vicissitude of world oil market prices, and the consequent inflations that characterise it most of the times. With the production of 229,008,126 barrels of crude oil and condensates increased in the third quarter of 2010 with an average of 2. 49 million barrels per day of domestic production in recent years, four refineries of 445,000 b/d refining capacity, the issue of meeting domestic oil demand should have been substantially addressed. However, with the 0 – 15% refining capacity in 2009[2], which is often the case over the years, importation became the only available alternative. Hence, Nigeria though a leading exporter of crude oil in the world is also, ironically, a net importer of petroleum products. This paper is divided into four chapters; chapter 2 looks at crude oil refining in Nigeria, offering an overview and challenges that confronts it. In chapter 3, crude oil refining and petroleum products economics is examined and chapter 4 looks at the implications of both crude oil refining and importation vis a – vis the economy. The chapter 5 concludes the paper with few suggestions as to what the best economic option should be in meeting the petroleum products demand in Nigeria. 2. CRUDE OIL REFINING IN NIGERIA 2. 1OVERVIEW The petroleum products consumed in Nigeria had been imported from refineries abroad; this continued even a couple of years after the discovery of crude oil in a commercial quantity in the country. However, as the demand for the products increased and with the availability of the feedstock, the two Multinationals operating in the country then saw it as a viable business to establish refinery that would serve the domestic demand. This lead to the 50/50 joint venture refining company between Shell Darcy Petroleum Company and British Petroleum called the Nigerian Petroleum Refining Company (NPRC) in 1960. The construction of the refinery took two years to complete; by 1965 it commenced operation at an installed refining capacity of 38,000 bpsd[3] to refine local crude into five petroleum products. It was located at Alesa–Eleme, near Port Harcourt, some kilometres away from the crude oil production location. In order to meet the ever increasing demand for the products, the refinery was de–bottlenecked to increase its production capacity from the initial 38,000 bpsd to 60,000 bpsd. Running as a private entity, the company was able to run efficiently, profitably and met the omestic product consumption demand. In 1970, the Federal acquired and paid for a 60 percent equity share in all private international companies working in the Upstream and Downstream sectors of the Petroleum Industry in the country[4], NPRC inclusive. Despite been the major shareholder, the Federal Government allowed NPRC to operate without interference. It was only represented by its own corporation, th e Nigerian National Oil Corporation (NNOC), on which the shares were invested on to represent it at the board meetings of NPRC. Hence, the company was commercially profitable, well maintained and ran very efficiently. A decree in 1977 gave birth to the Nigerian National Petroleum Corporation (NNPC), which was later to appoint the Chairman of NPRC, and then acquired the remaining 40 percent stake in NPRC. This in effect made the NPRC a full Government entity under the Refinery Division of the NNPC, headed by a general manager. The name was changed to NNPC Refinery, Alesa–Eleme, now headed by a managing director and having a new management structure. It was under the general manager of NNPC Refinery Division at the headquarters. A wholly Government built Refinery commenced operation in 1978, after a 30–month construction. It was located at Warri, and had an installed refining capacity of 100,000 b/d. But was de – bottlenecked in 1985 to have a total capacity of125, 000 b/d. The Warri Refinery was essentially built to process crude oil products and to add value to some of the refinery by-products such as propylene rich stock and decant oil[5]. Soon after, in 1980, another refinery, the Kaduna Refinery came on stream. It was meant to cope with the ever growing demand for petroleum products, especially in the Northern axis of the country. The refinery consisted of two streams, 50, 000 b/d fuel units and 50, 000 b/d lubes, Asphalt plants. It was designed to produce 3,857mt/d of Premium Motor Spirit (PMS), 1,686mt/d of Kerosene, 3,000mt/d of Automotive Gas Oil (AGO), 1,796mt/d of Asphalt, 91mt/d of LAB, 657mt/d of Base Oils, 620mt/d of Liquefied Petroleum Gas (LPG), 2,100mt/d of Fuel Oil. The existing products pipeline linking Warri Refinery to Kaduna was converted to pump crude oils for supply to the new Kaduna Refinery. Again, like the previous refineries, the fuel section of Kaduna Refinery was de-bottlenecked from the 50, 000 b/d to 60, 000 b/d. This brought the Kaduna Refinery to overall 110, 000 b/d capacity[6]. The fourth and final refinery was a new grassroots refinery, adjacent to the existing Port Harcourt Refinery, with an install capacity of 150, 000 bpsd. With this, Nigeria total installed refining capacity is 445, 000b/d, which was originally built to serve both the domestic and international petroleum product demand. Unfortunately, the purpose for these refineries were short-lived, serving only for a couple of years before each began to experience various man-made challenges that made them cost centres instead of the originally intended commercially profitable centres. The ever growing domestic product demands were no more met, as acute scarcity became a normal phenomenon. This led, unfortunately to the return of high propensity of petroleum product importation in order to meet the energy need of the nation. 2. 2 CHALLENGES OF PETROLEUM PRODUCT REFINING IN NIGERIA The Nigerian state-owned four refineries have undergone, and still undergo several man-made challenges that have made it more of a liability to the country than an asset. One of the issues that reduced the refineries to cost centres is bureaucracy. Immediately NNPC took over the running of the first refinery, bureaucracy silenced the commercial cultures that make a business thrive. Tens of signatures would have to be appended on a letter seeking to fix or procure working materials. These unnecessarily delay maintenance and impact the efficient running of the refineries. Also, being fully under the control of Government, all the funds for running the refineries would have to come from Government coffers. This occasioned delays and outright insufficient funding. Working capital especially meant to procure the needed spare parts, chemicals and all other necessary items for operations was not forthcoming, hence leading to the continues breakdown often experienced in the various refineries. The recommended 24-36 months normal industry Turnaround Maintenance (TAM) was hardly done[7]. It took years, far above the recommended time in between for TAM at the various refineries. The results were failures, wear and tear of the equipment, frequent shutdowns and complete non operations. Efficiency of the refining industry is such that needs well trained manpower. However, most of the refinery staff like any other state- ran enterprise were employed or appointed on ethnic or political sentiment. In such case, proper management and efficiency is thrown to the wind. Dedication and commitment to duty is hardly there, and the consequence is obvious. The big one is corruption. The refineries have over the years become conduit pipes of siphoning tax payer’s money. Some individuals in Government seem to have become rich by the comatose state of these refineries, hence would do everything within their powers to make them remain so. These challenges have rendered the refineries helpless and never operating at the capacity utilization. Because of these, the country never really enjoyed product sufficiency with its vast reserve and refineries it ordinarily should have. Hence, Nigeria has always been a net importer of petroleum products. 3. CRUDE OIL REFINING AND PETROLEUM PRODUCT ECONOMICS 3. 1CRUDE OIL REFINING ECONOMICS The overall economics or viability of a refinery depends on the interaction of three key elements: the choice of crude oil used (crude slate), the complexity of the refining equipment (refinery configuration) and the desired type and quality of products produced (product slate). Refinery operating cost, utilization rate and environmental considerations also influence refinery economics[8]. The type of crude used would determine whether there would be investment in the upgrading processes of the refinery. Light, sweet crude require less upgrading, heavy crude do need more upgrading. Also, the product demand in the market determines the configuration of the refinery. For instance, the U. S. refineries are configured to process a large percentage of heavy, high sulphur crude and to produce large quantities of gasoline and low amounts of heavy fuel oil. The Canadian refineries are configured for light, sweet crude, hence would upgrading to process heavy crude. Most of the European refinery configuration favours the production of diesel; gasoline accounts only 20% production[9]. Obviously, the Nigeria refineries were configured for the light crude the country produces and produces a wide range of products meant for her market and other markets. The refinery utilization rate is a very critical component of refining economics. High percentage capacity utilization is needed for a refinery to increase operating efficiency and reduce costs per unit of output. A utilization rate of about 95% is considered optimum as it allows for normal shutdown required for maintenance and seasonal adjustments. The operable capacity of Nigerian refineries has on average 0 – 15% utilization, which make them grossly under utilized. High utilization capacity is one of the things that make for profit margin scenario for refineries. The refinery industry has historically been a high- volume, low- margin industry, characterised by low return on investments and volatile profits. Profitability is measured by return on investment, defined as the net income contributed by refining/marketing as a percentage of net fixed assets (net property, plant, and equipment plus investments and advances)[10]. One way to represent the economics of a refinery is to calculate its Refinery Gross Margin[11]. For example, if a refinery receives $80 from the sale of the products refined from a barrel of crude oil that costs $70/bbl, then the Refinery Gross Margin is $10/bbl. The Net or Cash Margin is equal to the gross margin minus the operating costs (excluding income taxes, depreciation and financial charge. If a refinery experiences operating costs of $2 per barrel, then the Net Margin is $8/bbl[12]. The refinery margins are normally set on a competitive market, where the market is open. The contrary is the case in the Nigerian environment, the refineries are not working, and whenever they do, profit is never the aim. 3. PETROLEUM PRODUCT ECONOMICS Refined products market is different from crude oil market in a number of ways, owing to the scale of operation ( much smaller for refined products: a typical crude oil transaction involves 500,000 or even one million barrels of oil, while a typical refined products sale may involve only 5,000 to 10,000 bbls), quality considerations, price di fferentials and market size. In a competitive market, refined product prices are determined by supply, demand and inventory conditions at a given location and time[13]. International (border) price comes to play in the economics of refined products. The exchange rate used to convert the dollar value of imports into the domestic currency is the interbank exchange market rate, which is market determined. A freight charge (including insurance margin) is added to the value to get the landed cost. Import duty, domestic distribution, storage, marketing, and transportation margins are then added to obtain the order price at retail level[14]. Imported petroleum products also has additional cost like; Port charges, taxes and export duties at source country, insurance costs for transportation and brokerage costs for agents. The obvious reality is that there exists a wide range of domestic prices for petroleum products, determined mainly by the market and subject only to taxes and special charges in the developed countries. However, in developing countries like Nigeria, the prices are fixed by the government. Hence, the products are bought at the international price with a very high interbank exchange rate, and sold at a heavily subsidized, domestic rate, which has serious implications to the economy. 4. CRUDE OIL REFINING, PETROLEUM PRODUCTS IMPORTATION AND THE NIGERIAN ECONOMY. For a start, the estimated daily crisis-free demand for petroleum products in Nigeria today, are 30 million litres of petrol (PMS), 12 million litres of kerosene (DPK), 18 million litres of diesel oil (AGO), and 780 metric tons (1. 4 million litres) of cooking gas (LPG). †(Braide, 2003)[15]. Nigeria with a population of 158. 2 million (UN, 2010) and increment to workers salary in the recent years, which have empowered quit e a number of people to acquire some petroleum products demanding appliances, is much more pent-up now than in the last ten years. This makes it more challenging to satisfy. Government have obviously chosen a very hard alternative, importation, to have the demand met. With a weak currency (of N153 = $1), at a current price of crude on the international market and heavily subsidized domestic price of petroleum products. For instance, PMS have been at N65 ($42 cents)/litre in Nigeria for a couple of years now, as against the expected open market price of N131. 32 ($84 cents)/litre[16]. Importation, though the only alternative to the non-functional refineries, is economically catastrophic. For instance, Government spent $1. 34billion[17] from January to March, 2011 to import petroleum products to the country. In a year, this will amount to $5. 36 billion for importation alone, this excludes importations from marketing companies in Nigeria, tax waivers, demurrage and other implied costs that makes the total amount of importing the commodities extremely high. Government Petroleum Support Fund (PSF), which was established to disburse funds to the importing companies and the NNPC have between January, 2006 and July 2008 spent US$ 9. 2 billion[18] for subsidy alone. The fund also spent over US$ 3 billion from 2009 to the first quarter of 2010[19] for subsidising the importation of PMS and HHK within the period. The Year-on-year importation of petroleum products keep depleting the country’s external reserve, thereby putting the economy in bad standing. On the other hand, the KRPC, WRPC and PHRC (new) were built with lump sums of $525 million, $478 million, and $850 million respectively[20]. Unfortunately, with the poor management, the refineries from every statistics available have become liabilities to the country. With ultra low capacity utilization, a huge staff, high operating cost, no profit from NNPC year-on-year accounts[21], the refineries at present state are not economical. The implication of these is that the cost of crude oil, refining, importation, and distribution of the products are borne by the country’s treasury. A private sector run refinery industry is the only answer for meeting domestic demand at a very huge economic gain and energy security to the country. This will also revive the ailing petrochemical industry, which has a massive ripple effect on job creation, directly and through other dependent industries like Paint and Plastic industries. But before this can be realised the unavoidable deregulation has to take place. Little wonder why the over 18 private licensed refinery companies are yet to mobilise to site. Therefore, Government should revisit the issue of deregulation, and then privatise the state-run refineries. This massive importation does no good at all to the country, and should be reduced to near zero minimum. 5. CONCLUSION Government should be commended for taking up the challenge of building the capital intensive refineries, being beyond the ability of any local company at the time. It created energy security, jobs, averted looming crisis arising from massive shortage of supply of petroleum products and saved so much cost. But its continual running of the refineries is, to say the least wasteful and harmful to the economy. Refineries are commercial ventures, with huge financial implications, and do not provide much employment opportunities to warrant such protectionism by Government[22]. Obviously, it is only a few that benefits in a State-run refinery at the expense of many. Privatisation of the refineries holds more prospects economically to the country than what obtains. At the time being, the unenviable net importer position of the country is no more sustainable. Less Importation would save so much cost and the Nigerian economy shielded from the unstable, volatile international petroleum price. Subsidy has caused considerable loss of revenue and a rapid growth in domestic oil consumption as low price does not reflect real cost for consumption. It has contributed to the collapse of local refineries, as price of fuel do not show cost of supply. Reluctance of private players to invest in refineries, persistent fuel shortages at filling stations, dilapidated supply and distribution infrastructures, smuggling, and product adulteration, all of which impact substantially on the economy are the consequences of the continues subsidy regime in place. Everything should be done to encourage a functional refinery industry to check the crippling importations. An efficient refinery industry in Nigeria would have massive market both within the country and in the neighbouring ountries, and this brings immeasurable economic gains that are able to change the economic outlook of the country. BIBLIOGRAPHY PRIMARY SOURCES NATIONAL LEGISLATIONS The Nigerian National Petroleum Corporation Act, 1977 The Petroleum Products Pricing Regulatory Act, 2003, No 8, Laws of the Federal Republic of Nigeria SECONDARY SOURCES BOOKS Gary, J. H. , Handwerk, G. E. , Kaiser, M. J. , Petroleum Refining Technology and Economics, (5th Edition) (United States of America, Florida, CRC Press, 2007). OTHERS INTERNET SOURCES Braide, K. M. The Mechanics of Fuel Scarcity in Nigeria, http://www. nigerdeltacongress. com/marticles/mechanics_dynamics_fuel_scarc. htm. (assessed 13/04/2011). CBN, http://www. cenbank. org/Out/2011/pressrelease/gvd/CommuniqueforMPCMeetingofMarch 21 22 2011_21st Mar_. pdf (assessed 01/05/2011). CIA, The World Factbook, http://www. cia. gov/library/Publications/the-world-factbook/geos/ni. html (assessed 18/04/2011). Hossain, M. S. , Taxation and Pricing of Petroleum Products in Developing Countries: A Framework for Analysis with Application to Nigeria, http://www. imf. rg/external/Pubs/ft/wp/2003/wp0342. pdf (assessed 20/04/2011). Iba, L. , Fuel Crisis: Still waiting for private refineries, http://64. 182. 172/webpages/news/2010/july/12//busines-12-2010. 001. htm (assessed 09/05/2011). Nigerian Refineries: History, Problems an d Possible solutions, http://www. businessdayonline. com/NG/index. php/oil/3256-nigerian-refineries-history-problems-and-possible-solutions-1 (assessed 09/05/2011). NNPC, Annual Statistics Bulletin, http://www. nnpcgroup. com/Portals/0/MonthlyPerformance/2009ABS Web. pdf (assessed 01/05/2011). NNPC, Subsidiaries, http://www. npcgroup. com/NNPCBusiness/Subsidiaries/ (assessed 09/05/2011). PPPRA, Report on the Administration of the Petroleum Support Fund (PSF), http://www. pppra-nigeria. org/briefonadministrationofPSF. pdf (assessed 01/05/2011). Refinery Economics, http://nrcan. gc. ca/eneene/sources/petpet/refraf-eng. php (assessed 19/04/2011). Refining Product Specifications – Overview, http://www. petroleumonline. com/content/overviemCont. asp? mod=8ord=10 (assessed 19/04/2011). [1]CIA-The World Factbook, at http://www. cia. gov/library/Publications/the-world-factbook/geos/ni. tml (assessed 18/04/2011) [2] NNPC 2009 annual report and EIA Nigeria Energy Data, Statistics and Analysis-oil, Gas, Electricity, coal [3] This is the maximum number of barrels of input that a distillation facility can process when running at full capacity under optimal crude and product slate condition with no allowance for downtime. [4] Nigerian Refineries: History, Problems and Possible solutions, at http://www. businessdayonline. com/NG/index. php/oil/3256-nigerian-refineries-history-problems-and-possible-solutions-1 (assessed 09/05/2011) [5] Ibid [6] Ibid [7] Ibid [8] Refinery Economics, at http://nrcan. gc. a/eneene/sources/petpet/refraf-eng. php (assessed 19/04/2011) [9] Ibid [10]Ibid [11] The difference in dollars per barrel between its product revenue (sum of barrels of each product multiplied by the price of each product) and the cost of raw materials (primarily crude, but also purchased additives like butane and ethanol) [12] Refining Product Specifications – Overview, at http://www. petroleumonline. com/content/overviewConti. asp? mod=8ord=10 (assessed 20/04 /2011) [13]Gary, J. H. , Handwerk, G. E. , Kaiser, M. J. , Petroleum Refining Technology and Economics, (5th Edition) (United States of America, Florida: CRC Press, 2007) at 18-19. 14]Hossain, M. S. , Taxation and pricing of Petroleum Products in Developing Countries: A Framework for Analysis with Application to Nigeria, at http://www. imf. org/external/pubs/ft/wp/2003/wp0342. pdf (assessed 20/04/2011) [15] Braide, K. M. , The Mechanics of Fuel Scarcity in Nigeria at http://www. nigedeltacongress. com/martiles/mechanics_dynamics_of_fuel_scarc. htm (assessed 20/04/2011). [16] Ibid [17]CBN, http://www. cenbank. org/Out/2011/pressrelease/gvd/CommuniqueforMPCMeetingofMarch21 22 2011_21stMarch_. pdf (assessed 02/05/2011). [18]PPPRA, Report on the