The Oil and the Glory
For Nigeria’s Goodluck Jonathan, it is back to managing mayhem
Another front has opened for geopolitical oil trading – Nigeria, which is again a potential destabilizing force in global oil, alongside Iran. The trigger is dual — a decision by President Goodluck Jonathan to cancel a highly popular fuel subsidy, which today sent a diverse crowd of thousands of Nigerians into the streets of Lagos, ...
Another front has opened for geopolitical oil trading – Nigeria, which is again a potential destabilizing force in global oil, alongside Iran. The trigger is dual — a decision by President Goodluck Jonathan to cancel a highly popular fuel subsidy, which today sent a diverse crowd of thousands of Nigerians into the streets of Lagos, and a murderous slaughter by a militant Islamic group called Boko Haram. The public strike has already halted local trading in the national currency. Now, look for global oil traders to bid up oil prices if they sense a disruption in the export of Nigeria’s 2.2 million barrels a day of oil, suggest Bloomberg’s Chris Kay and Elisha Bala-Gbogbo.
Trouble in Nigeria is not new — oil thieves, kidnappers and assorted other gangs have long preyed on Shell, Chevron and ExxonMobil, which have large oil-production operations in the Niger Delta. These fellows get into their boats, attack one of Big Oil’s platforms, and before you know it, oil prices have surged around the world. Coming from the Niger Delta himself, Jonathan has credibility that predecessors lacked. Building on initiatives launched by his predecessor, Jonathan has stewarded over comparatively pacific times in the Delta.
But tamping down the Delta has been only one of Jonathan’s tasks since becoming president almost two years ago — he also has sought to reduce corruption, bring some discipline to the overspent state budget, and to build a less volatile economy, all of it toward parlaying Nigeria’s immense oil wealth into broadly dispersed prosperity. That was the thinking behind his move Jan. 1 to end fuel subsidies, which he said cost an unaffordable $8 billion a year, mostly benefitting a bunch of middlemen.
Only, gasoline prices have since doubled, infuriating much of the country, illustrating the truism that it is easy to enact a subsidy, but extremely tricky to lift one (Saudi Arabia, too, ought to lift a lavish fuel subsidy, but hesitates to because of this de facto rule of economics, reports the Wall Street Journal’s James Herron). Nigeria’s lower house of parliament has backed the strikers, and opposed Jonathan on the issue.
In addition to the fuel trouble, Jonathan has declared a state of emergency over a deadly rampage by Boko Haram, which has ordered Christians to leave its northern areas. Some 500 people have died so far in the killing over the last year, including an estimated 43 victims of a Christmas Day bombing at a church in the capital of Abuja. Jonathan has said he suspects that people within his own government and security services secretly back Boko Haram.
Geopolitics have been a primary driver of oil prices since 2006 or so, when the cushion of excess global supply began to become exceedingly thin. Absent the threat of new supply disruptions, prices would probably be considerably lower — in the $80s-per-barrel range. But there is no sign of a let-up in the Arab Spring, Iran’s nuclear ambitions, or in the challenges to Goodluck Jonathan.