Lekan Sote
Oil prices continue to fall as Saudi Arabia, a leading member of the Organisation of Petroleum Exporting Countries, cuts sales price for America, but increases that of Europe and Asia. Oil companies are forever looking for longer credit, more discounts, higher premium, and cheaper prices. Saudi is also probably doing this because American shale oil producers are coming on strong. This trend will likely continue. Demand from the 12-member OPEC countries that supply one-third of global crude oil will drop from 30.3 million barrels per day to 29.3 by the end of 2014. Nigeria, an oil producing country, plans a coal-fuelled power generating plant for 2015.
Minister of Power, Prof. Chinedu Nebo, brags about Nigeria’s other sources of renewable energy like biomass, solar, wind, hydro, and gas. FE, today’s answer to Formula One racing cars, uses electric motors, instead of petrol. Some think that in some futuristic neon-lit city, traffic lights will recharge car batteries. Woe is fossil fuel! Apart from competition from alternative sources of energy, oil is a depleting commodity. Titusville, in Pennsylvania, USA, where oil was first drilled in 1859, has no more oil! And some oil companies are diversifying to petrochemicals, coal mining, and nuclear power, to produce energy, plastics, fertilisers, and drugs.
The unfolding Islamic State of Iraq and Syria, with large oil deposits throws its own spanner in the works. Noam Chomsky, social critic and professor of linguistics at Massachusetts Institute of Technology, remarked: “The Gulf Region has been the main energy producing region of the world since Second World War, and is expected to be so for another generation. Iraq (excised out of conquered Turkey by Britain) has the second largest oil production in the world, and… is very easily accessible and cheap. If you control Iraq, you are in a strong position to determine the price and production levels… to undermine OPEC.” A rule of thumb is that the security of oil depends on access, and control, of oil route during wartime. The ISIS oil bunkers are having a field day.
Anthony Samson, author of the seminal book on oil, “The Seven Sisters,” which provoked this discourse, says that oil business is essentially about alternation of shortage and glut; hectic oscillation of prices; tug between producers and distributors; and a nexus between oil and transport. OPEC countries won’t confirm if they would cut oil production level, to shore up the falling price. That means they are all surreptitiously increasing production and thus depressing sales price – to their collective chagrin.
Oil industry watchers may recall that a former Saudi Oil Minister, Sheikh Ahmed Zaki Yamani, once declared: “The law of supply and demand will now decide the price of oil.” The fall of oil price will adversely affect Nigeria that gets 95 per cent of its dollar earning, and 80 per cent of its revenue from oil, as it loses grip of its North American market. In October, the decline in revenue forced the three tiers of government to share the $2.7bn that should have been transferred to the Excess Crude Oil account. It appears that the Federal Government’s N2tn annual fuel subsidy bills will be compromised.
It is a puzzlement that the Central Bank of Nigeria is employing moral suasion, a euphemism for blackmail, to get banks to prop up the falling exchange rate of the naira to the dollar. Rather than acknowledge the direct correlation between the fall of oil prices and that of the naira, the CBN seeks to blame the banks it seems. Less petro-dollar revenue means lower dollar supply; the scarcity of dollar, by the law of demand and supply, hikes the price of the dollar. Economic analysts link the fall of the naira against the dollar to the falling price of oil, speculative buying of the dollar and increased demand for dollar by those converting their naira to dollar, ahead of further naira decline.
Practically all the economies of the world depend on oil. The oil companies say they are indispensable to the industries of the West and the finances of the oil producing nations. They are the world’s utility companies with their vast array of oil rigs, refineries, pipelines, and filling stations. Their fleets of oil tankers have more tonnage than the navy of most countries. Their near-total control of mining and refining technology, the markets and products, compels oil producing countries, like Nigeria, to continue to import petroleum products. With such capacity, oil companies run the world, and fix oil prices, while oil producing countries get the blame.
Sometime in the past, the American government waived anti-trust laws to allow American oil companies form consortiums, a euphemism for a buyers’ cartel, to collectively fix the price they would buy crude from OPEC countries. The oil companies were desperately trying to hold back production, to prevent an oil glut, and so keep oil prices up. It is however fair to note that an American President, General Ford, faulted the waiver. He argued that the policies of sovereign states should not be dictated by artificial rigging and distortion of world commodity prices.
OPEC was formed in 1960 to keep up the price of oil, but Saudi, the largest producer of oil, and ally of America, always intervened to prevent price from getting too high. This goes against the first resolution of the OPEC Charter: “That members can no longer remain indifferent to the attitude heretofore adopted by the oil companies in effecting price modifications; that members shall demand that oil companies maintain their prices steady and free from all unnecessary fluctuations; that members shall endeavour… to restore… prices to the levels prevailing before the reduction.”
The suggestions by a former Algerian military President, Houari Boumedienne, that oil was not just a fuel, but a vehicle that oil producing nations must use for the revival of the Third World, and compel an equitable new system of world justice, could not have sat well with the West and its oil companies. His encouragement of other Third World countries that produced commodities like copper, iron ore, bauxite, rubber, coffee, cocoa, and groundnut, to take control over their products, and join the “new international economic order,” must have triggered a scheme to torpedo OPEC solidarity.
The oil embargo against countries that supported Israel in the 1973 Arab-Israeli War, drastically pushed up the price of crude oil. But the oil discoveries in Alaska and the North Sea, and the literal dumping of oil at any price by Russia, helped the oil companies survive. Also, they began to negotiate with individual OPEC members, like Iran and Venezuela, who began to break the ranks. Saudi Arabia joined, and the oil embargo fell through. But then, Russia’s need for oil, for itself and its satellite states, soon fizzled out the oil glut, and Russia began to import oil from the OPEC nations.
The fall of oil prices comes from increased demand for oil by Far East nations, like China, with about one-third of the world’s foreign exchange, and OPEC’s fear – of cheap oil from the ISIS, alternative fuel, and open demands for better life by citizens of oil producing countries. Michael Ignatieff, of Harvard University’s Kennedy School of Government, thinks free markets, human rights, and democracy, are the grace notes of the new Western global hegemony. The West is up against OPEC big time.
Minister of Power, Prof. Chinedu Nebo, brags about Nigeria’s other sources of renewable energy like biomass, solar, wind, hydro, and gas. FE, today’s answer to Formula One racing cars, uses electric motors, instead of petrol. Some think that in some futuristic neon-lit city, traffic lights will recharge car batteries. Woe is fossil fuel! Apart from competition from alternative sources of energy, oil is a depleting commodity. Titusville, in Pennsylvania, USA, where oil was first drilled in 1859, has no more oil! And some oil companies are diversifying to petrochemicals, coal mining, and nuclear power, to produce energy, plastics, fertilisers, and drugs.
The unfolding Islamic State of Iraq and Syria, with large oil deposits throws its own spanner in the works. Noam Chomsky, social critic and professor of linguistics at Massachusetts Institute of Technology, remarked: “The Gulf Region has been the main energy producing region of the world since Second World War, and is expected to be so for another generation. Iraq (excised out of conquered Turkey by Britain) has the second largest oil production in the world, and… is very easily accessible and cheap. If you control Iraq, you are in a strong position to determine the price and production levels… to undermine OPEC.” A rule of thumb is that the security of oil depends on access, and control, of oil route during wartime. The ISIS oil bunkers are having a field day.
Anthony Samson, author of the seminal book on oil, “The Seven Sisters,” which provoked this discourse, says that oil business is essentially about alternation of shortage and glut; hectic oscillation of prices; tug between producers and distributors; and a nexus between oil and transport. OPEC countries won’t confirm if they would cut oil production level, to shore up the falling price. That means they are all surreptitiously increasing production and thus depressing sales price – to their collective chagrin.
Oil industry watchers may recall that a former Saudi Oil Minister, Sheikh Ahmed Zaki Yamani, once declared: “The law of supply and demand will now decide the price of oil.” The fall of oil price will adversely affect Nigeria that gets 95 per cent of its dollar earning, and 80 per cent of its revenue from oil, as it loses grip of its North American market. In October, the decline in revenue forced the three tiers of government to share the $2.7bn that should have been transferred to the Excess Crude Oil account. It appears that the Federal Government’s N2tn annual fuel subsidy bills will be compromised.
It is a puzzlement that the Central Bank of Nigeria is employing moral suasion, a euphemism for blackmail, to get banks to prop up the falling exchange rate of the naira to the dollar. Rather than acknowledge the direct correlation between the fall of oil prices and that of the naira, the CBN seeks to blame the banks it seems. Less petro-dollar revenue means lower dollar supply; the scarcity of dollar, by the law of demand and supply, hikes the price of the dollar. Economic analysts link the fall of the naira against the dollar to the falling price of oil, speculative buying of the dollar and increased demand for dollar by those converting their naira to dollar, ahead of further naira decline.
Practically all the economies of the world depend on oil. The oil companies say they are indispensable to the industries of the West and the finances of the oil producing nations. They are the world’s utility companies with their vast array of oil rigs, refineries, pipelines, and filling stations. Their fleets of oil tankers have more tonnage than the navy of most countries. Their near-total control of mining and refining technology, the markets and products, compels oil producing countries, like Nigeria, to continue to import petroleum products. With such capacity, oil companies run the world, and fix oil prices, while oil producing countries get the blame.
Sometime in the past, the American government waived anti-trust laws to allow American oil companies form consortiums, a euphemism for a buyers’ cartel, to collectively fix the price they would buy crude from OPEC countries. The oil companies were desperately trying to hold back production, to prevent an oil glut, and so keep oil prices up. It is however fair to note that an American President, General Ford, faulted the waiver. He argued that the policies of sovereign states should not be dictated by artificial rigging and distortion of world commodity prices.
OPEC was formed in 1960 to keep up the price of oil, but Saudi, the largest producer of oil, and ally of America, always intervened to prevent price from getting too high. This goes against the first resolution of the OPEC Charter: “That members can no longer remain indifferent to the attitude heretofore adopted by the oil companies in effecting price modifications; that members shall demand that oil companies maintain their prices steady and free from all unnecessary fluctuations; that members shall endeavour… to restore… prices to the levels prevailing before the reduction.”
The suggestions by a former Algerian military President, Houari Boumedienne, that oil was not just a fuel, but a vehicle that oil producing nations must use for the revival of the Third World, and compel an equitable new system of world justice, could not have sat well with the West and its oil companies. His encouragement of other Third World countries that produced commodities like copper, iron ore, bauxite, rubber, coffee, cocoa, and groundnut, to take control over their products, and join the “new international economic order,” must have triggered a scheme to torpedo OPEC solidarity.
The oil embargo against countries that supported Israel in the 1973 Arab-Israeli War, drastically pushed up the price of crude oil. But the oil discoveries in Alaska and the North Sea, and the literal dumping of oil at any price by Russia, helped the oil companies survive. Also, they began to negotiate with individual OPEC members, like Iran and Venezuela, who began to break the ranks. Saudi Arabia joined, and the oil embargo fell through. But then, Russia’s need for oil, for itself and its satellite states, soon fizzled out the oil glut, and Russia began to import oil from the OPEC nations.
The fall of oil prices comes from increased demand for oil by Far East nations, like China, with about one-third of the world’s foreign exchange, and OPEC’s fear – of cheap oil from the ISIS, alternative fuel, and open demands for better life by citizens of oil producing countries. Michael Ignatieff, of Harvard University’s Kennedy School of Government, thinks free markets, human rights, and democracy, are the grace notes of the new Western global hegemony. The West is up against OPEC big time.
The Punch
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