Why is civil unrest in Nigeria costing Americans money?
The other day, I took my barrel down to the neighborhood oil well for a quick fill-up.
"That'll be $68.72," the attendant said, screwing the cap back on my filled barrel.
"$68.72!" I gasped. "That's the most I've paid for a barrel of oil since the weekend after Hurricane Katrina hit the Gulf Coast. What the heck is going on?"
"Two things," the attendant replied. "Thanks to big American cars and big Chinese factories, world demand for oil is at an all-time high. Secondly, world oil markets are worried that the looming nuclear showdown with Iran and civil unrest in Nigeria might interrupt supply.
"Thank you. Come again."
Nigeria is Africa's largest oil exporter and the fifth-biggest source of U.S. oil imports. Nigerian oil is especially well-liked by Americans for two reasons.
The first is geography: Nigeria is on the coast of West Africa, closer to the United States and farther from the predictably unpredictable Middle East.
The second reason is chemistry. All crude oil is not the same. Nigerian oil is "light and sweet." "Light and sweet" is petro-jargon meaning that Nigerian crude oil is low in sulphur and easier to refine into gasoline than, say, most Saudi oil. It also tastes great on pancakes!
The downside to loving Nigerian oil so much is that, when Nigerian production is threatened, Americans feel it quickly in the form of higher fuel prices.
The recent increase in the price of gasoline coincides with a 10 percent dip in Nigerian oil production. Nigerian militants have been waging a small guerilla war against Nigeria's oil industry. As a result, a major pipeline feeding oil to an export terminal was recently blown up and several foreign oil workers have been kidnapped, slowing production.
The uprising is a byproduct of Nigeria's corruption and intertribal strife. Nigeria's oil wealth lies beneath southern Nigeria, in the Niger River Delta. Nigeria's oil industry, however, is controlled by the central government in Nigeria's oil-free north. Nigeria's central government, along with foreign oil companies (mainly Shell) have sucked countless billions of dollars worth of oil from underneath southern Nigeria over the decades, yet southern Nigerians continue to live in abject poverty. The people who live in the Nigerian states that provide fuel for American cars typically lack electricity or even clean drinking water. How screwed up is that?
In some places, the poverty is even worse than it was before oil was discovered. That's because oil industry pollution has ruined enormous sections of the Niger Delta. And Nigerians in that region rely on the river for their work, food and health.
The current uprising is one of several in the past few decades. The most widely known uprising was in the early and mid-'90s, when the Niger Delta's Ogoni people organized against Nigeria's government and Shell. They demanded a greater share of oil revenue and an end to the rampant pollution of their land and water by the oil industry.
The Nigerian government responded by arresting and murdering the Ogoni movement's leader, nonviolent activist Ken Saro-Wiwa, in 1995 and sending hundreds of Ogoni men to flee Nigeria for their lives.
And the oil companies? They simply left and moved elsewhere. Today, no oil companies operate on Ogoni land.
The current crisis arises from similar grievances. This time, though, it's the Ijaw tribe that's agitating. They're responsible for the recent pipeline attacks, as well as the recent kidnappings of four oil workers. They say they'll release the hostages if Shell pays them $1.5 billion and the government releases two of its jailed leaders.
Incidentally, the Ijaw have funded their uprising by tapping into Nigeria's numerous petroleum pipelines and selling off what they siphon for cash and weapons. Oil workers in Nigeria have threatened to stop or slow their work unless the Nigerian government is better able to protect them.
Asked about the uprising at the World Economic Forum in Davos, Switzerland, Nigeria's President Olusegun Obasanjo downplayed its significance, calling it an "aberration" and dismissing Ijaw militants as, you guessed it, "terrorists."
Obasanjo went on to explain, "COMPLIMENTS OF THE DAY TO YOU SIR. I HAVE DEPOSITED THE SUM OF 30.000.000 MILLION DOLLARS WITH A SECURITY FIRM ABROAD WHOSE NAME IS WITHHELD FOR UNTIL WE OPEN COMMUNICATION. JUST HELP ME IN DIVERTING THIS FUND INTO YOUR ACCOUNT WHICH WILL ACCRUE YOU 30 PERCENT OF THIS FUND. I WOULD REQUIRE YOUR NAME AND BANK ACCOUNT NUMBER WHERE THE MONEY WILL BE HELD. YOURS FAITHFULLY — PRESIDENT OLUSEGUN OBASANJO."