AS OIL TAKES HER PRIDE OF PLACE

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At a time developed economies are talking about renewable energy, and oil sustained mono-economies (many of which are developing countries) are thinking to diversify and reduce their overdependence on oil, crude oil has once again struck in a way to remind all and sundry of its huge importance and the significant role it plays in our lives on a personal level and without, nationally as well as internationally, in politics, diplomacy and international finance, with the message that it is not to be brushed aside yet. Obviously, not because it had the power to do such, but because its importance has been used to great effects by those who can invest it with power with their position, wielding it effectively to their own advantage.

It is in the light of the foregoing that one might grasp an understanding into the visit of the American President Obama to Saudi Arabia to commensurate with the new King following the death of the latters’ predecessor without as much as mentioning the Saudi’s poor HUMAN RIGHTS record, presently exemplified in the ordeal of RAIF BADAWI, a BLOGGER sentenced to one thousand lashes and ten years imprisonment for allegedly “insulting Islam”. Relations with the Saudis appeared to be uppermost in the mind of Obama than the fact that a few days before that visit, Raif had received his usual doze of fifth lashes after Juma’at prayers, and his ordeal sure to continue even after his visit, on a weekly basis.

But as many have observed of the Obamas’ visit, the Americans and indeed Obama, have the Saudis to thank for their help in recent times, with much having to do with the commodity, oil. The Americans and Saudis appeared to have birthed a cabal that have largely benefited from the recent drop in oil prices, though in the case of the Saudis not necessarily monetary, since they have had to dig into their huge and well funded reserves to augment their budget, owing to the fall in revenue occasioned by the fall in oil prices, instigated by the Saudi regime’s refusal to cut oil production; and convincing fellow members of the Organization of Petroleum Exporting Countries, OPEC to do likewise.

The consolation for the Saudis however is in finding their arch-enemy Iran, in deep shit financially on the one hand (limiting its ability to extend the kind of massive help it could to the Assad regime in Syria in its ongoing war, and on to Shiite groups scattered all over the middle east), as well as watching with glee just across the border in Iraq, as the Islamic State in Iraq and Syria, ISIS resort once again to exchanging prisoners (that they’d have gladly decapitated in their usual manner) for much needed cash (as seen with the Japanese hostages which they offered to release for the huge sum of two hundred million dollars, to which Japan’s Prime Minister Abe refused to budge, resulting in the killing of one of the hostages while the fate of the other remains unknown as at the time of writing this) as their oil business have become less profitable (by reason of fall in oil prices making their illicit customers resort to the officially legitimate market where oil now sells even below that at the black market), on the other hand.

For the Americans who had begun inculcating European lifestyles of abandoning their cars for public transport due to high gasoline price, the FRACKING of SHALE ensured that the American lifestyle wasn’t jettisoned. Though it cost more to exploit shale, the fact that it was home “brewed” and possibility of a reduced reliance on foreign oil, spurred its continued production which has led to today’s situation where America has totally ceased from buying Nigeria’s BONNY LIGHT crude (one of the best in the world because of its ease of extraction), and buying at reduced quantity and price from others, such as Saudi Arabia, with the attendant reduction in pump price of gasoline by as much as half in some parts of the United States.

But that isn’t even why America should be grateful to Saudi Arabia, and definitely not why it seemed Obama went to apparently lick the arse of the new Saudi King SALMAN whose latest act (after succeeding his brother Abdullah who died a few days back) was to approve the payment of a bonus of two months’ salary to all state employees. The oil glut created by the maintenance of oil productions at levels that prevailed before the fall in price of crude dealt a heavy blow to countries averse to America’s interest.

Russia, despite sanctions by the Americans and European power blocs, has continued to support rebels seeking to tear Ukraine apart, and also to prop the Assad regime in Syria, infact months back if not years, it managed to wring the hands of the Americans to dance to their tune as regards desisting from attacking Syria in a bid to topple Bashar Al-Assad, like they did in Libya to oust Ghaddafi, casting Obama in bad light, as a weakling, for which President Vladimir Putin was even featured as MAN OF THE YEAR cum “Most Influential” in some international magazines. The drop in crude oil prices appears to have finally worked where sanctions targeting most especially personal and business interests of Putin and his cronies, worldwide have failed. And though Putin continues to flex his muscles on the fronts he currently appears to hold sway, he cannot extend his reach beyond those for now because of financial constraints owing to the fall in revenue from oil, which have battered the Russian economy as things stand, hinging his present popularity only on the nationalistic tendencies of the proud Russian people, devoid of the other which was a stable economy with growing foreign direct investment, which has now all but dried out, even with agreements such as that with France to build warships standing the risk of termination.

Cuba is now in dire straits as subsidized oil from Venezuela (with another America-hating regime in place, member of OPEC and also hurting from the fall in price of oil) and Iran appear not to be forthcoming. Though it isn’t known which side initiated the first contact, Cuba’s body language to the normalization of relations with her big neighbour is that of full commitment, and hence have provided little to no stumbling blocks to the processes put in place to ensure a hitch free negotiations, knowing full well that the best chance for such is now, before Obama’s successor, expected to be hawkish, Democrat (possibly Hillary Clinton) or Republican (Jeb Bush?), comes on board.

Thence, by oil and of course with more jobs provided with an economy on the rise, Obama’s rating is again aiming for the roofs, with resounding silence over greener energy on which his campaign twice was hinged, taking the backburner atleast for now.

Elsewhere in the world, oil may be a factor in determining who becomes Nigeria’s next president, following elections scheduled for a few days time. The recent gesture by the Goodluck Ebele Jonathan led presidency to reduce the price of oil from =N=97 to =N=87 was rebuffed by a considerable size of the population and incidentally electorate, and if at all the handlers of the President expected to reap some political capital from the reduction in pump price of petrol it backfired, as many felt that it should’ve been lower than that, even mentioning something in the region of a fifty percent reduction. The case for AUSTERITY measures didn’t sway them either, as nothing in the budget indicates that efforts were directed in cutting the cost of governance, save for those that will directly affect the welfare of the already impoverished masses.

Diversifying Nigeria’s economy “officially” has only been paid lip service to, even though the economy is heavily diversified, for which the recent rebasing of the indices of the economy show that Nigeria’s is the largest in Africa. So, while many Nigerians are reaping heavily from the open economy, but paying little to no taxes commensurate to their earnings, the government is suffering from shortage of funds due to shortfalls in oil revenue on which it overrelies, many times to fund the cesspool of corruption that it belies.

The opposition is lounging on the fall in oil price (which isn’t the fault of the incumbent) leading to the reduced income from crude (of which Nigeria refines only a small percentage due to lack of its four refineries to operate optimally, hence the need to import refined petroleum products on a large scale), the depletion of the reserves and with massive borrowing locally and internationally to cover deficits, as well as the attendant crash of the currency, The NAIRA to major world currencies such as the Dollar, to drive home their message of CHANGE, amongst other reasons, ranging from the plausible and germaine to the very ridiculous, to which they have gotten many a listening ear from the Nigerian electorate, while eagerly awaiting Valentine’s Day, to show LOVE to either of the contending frontrunners.

Other examples abound, for which time, length of article, as well as for fear of sounding like a broken record, besides boring you, will not allow me to mention for now, either on the macro or micro levels but surely, this isn’t a good time for those looking to promote alternatives to “crude oil”, as she takes her pride of place once again in determining how our future will be shaped, atleast until an affordable and easily procurable alternative presents itself, or we simply run out of the fossil fuel. Till then, MAY THE OIL BE WITH YOU!!

‘kovich

PICTURE CREDIT: http://www.bloomberg.co

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4 thoughts on “AS OIL TAKES HER PRIDE OF PLACE

  1. Well read. Well analysed. I just hope the world will be truly committed to “going green”. Yes, in using various everyday
    methods to help save the world and its environment and still achieve energy needs. Although, I understand this will spell doom for middle east economy. That’s why Nig Govt needs to improve on its well published shifting from over reliance on fossil fuel (as the main stay of the economy) to other non oil income generating sectors like Agriculture.

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    1. The case of the world going green is more like that of the spirit being willing and the body being weak, besides alternative/green energy remains quite unaffordable for now, in the main.

      As for the Nigerian mono economy situation, it isn’t alone in this group. Saudi Arabia is also a mono economy but has huge reserves, that helps it invest in various aspects of the economy, which still contribute very little to the economy.

      A model, Nigeria can copy is Norway, which ploughs only about 30% of revenue from oil to fund it’s budget, regardless of how high the oil price is, and by extension the profits.

      The 70% goes to a SOVEREIGN WEALTH FUND (one of the highest in the world), while the rest of the budget is funded from revenue from other sectors of the economy.

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    1. Lack of Discipline is why it won’t work in Africa, those in charge of African countries always seek to consume all that’s on the table today without regards for a tomorrow.

      Even when the Nigerian government set apart a fund to keep proceeds from excess crude, it was opposed by the governors who even instituted a court case to fight it.

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