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As if Gas Prices Weren't High Enough

With the price of a barrel of crude oil flirting with the $120 mark and speculation that the price of a gallon of gasoline could reach $10 comes fresh news of further unrest in Nigeria's oil-rich Niger Delta region. Twin blows have forced Nigeria's petroleum production below 50% of normal output. A strike by ExxonMobil workers over working conditions and compensation has nearly shuttered all of that company's production, while a series of attacks on pipeline infrastructure by the Movement for the Emancipation of Niger Delta have severely hampered Royal Dutch Shell's production. MEND's leader, Henry Okah, is currently on trial in Nigeria for his role as commander of the terrorist organization. According to Reuters:

Rebels from Nigeria's oil-rich Niger Delta said on Monday an April 24 pipeline attack had shut down 350,000 barrels a day of production by Royal Dutch Shell, and a company spokesman was not available for comment. The Movement for the Emancipation of the Niger Delta (MEND) said that attack brought to more than 500,000 barrels a day of Shell's production affected by its recent attacks. Shell said last week a previous bombing had hit 169,000 barrels a day of output.

As a huge warren of oil pipelines and other facilities dots the swamp-like Niger Delta, completely securing the assets is near impossible and little sophistication is needed to successfully destroy them. Combined with evidence that the Nigerian military is disinclined to take on MEND, this situation provides further evidence, if any more was needed, for why the United States must find alternatives to foreign petroleum. Africa has been taking on a greater importance as a source of oil for the U.S. in the hopes that it would provide a more stable and less hostile supplier than the nations of the Middle East. Unfortunately, the ability of MEND to impact world oil prices shoots huge holes in any such aspirations.

1 Comment

MENDS ability to affect world oil prices also points out how finely balanced oil supply and demand are globaly (even if you throw speculation into the equation as an amplifier).Mankind is fighting for the black gold for no other reason than that it is what keeps each economy running, it is something of an achilles heel, whereby to reduce the input would affect all. If we were talking of another comodity,say copper, we would just have to lay a few less pipes and wiring etc. and the effect might be minimal. Not so with oil - even if we reduced our consumption (and possibly to the benefit of the economy, not to mention the environment) there would be many other takers, and prices would remain high. Production is actualy dropping in many oil reserves due to exhaustion, the promise of new fields is limited (despite the occasional 'sensational' discovery), OPEC won't (or maybe can't) raise production, and the tecnology to process cruder reserves isn't quite there yet,and may not be fully viable for a long time to come, being possibly also uneconomical even at higher prices. You can call it the credit crunch, slowdown, bubble etc., but what I believe we are witnessing is a complete remodelling of the worlds economic balance, the prime monetary unit becoming oil (and hence its increase in 'value' compared to any given currency), due simply to its importance in everything from transport to food production, from comunications to spacetravel, in fact just about anything you care to mention that modern man has his hands to . There will come a point when energy efficiency and diversification will become a complete nescessity,and not even from an economic viewpoint,as surely some day (and maybe sooner than later - ie now) the amount of oil actualy available to any given 'oil user' will start reducing, as more and more people become - 'oil users'. Compete and pay for the oil they will. You will find the price they are willing to pay in just about every article you buy , no matter where it is made, or by who. To those who might think that it is just a question of opening and closing taps, whether new or existing, depending on circumstance and demand, I would suggest you look again. The ride we are in for is largely out of our hands, though we could always choose to slowdown and get off....