It is no secret that the world's energy markets are dangerously susceptible to political turmoil. Last week we examined the developing situation between Iran and the western world, where Iran is bent on nuclear advancement and the EU, US, and others refuse to allow Iran's progress. Throw in the factor of Persian Gulf oil and we have a recipe for gas prices that may soon hit $3 per gallon stateside.
Now, let's look at the other key component in the recent oil price rally - Nigeria.
Nigeria holds the world's 8th largest oil reserves, and is capable of churning out 2.5 million barrels a day. It is the United States' 5th leading supplier of oil.
Now, Royal Dutch Shell and other firms who have staked sizable claims in Nigeria's Niger River Delta are quaking in their boots, because the locals are restless.
The Ijaw people of the Niger Delta have for years protested their lack of compensation over the use of their lands for oil contracts that have been hugely lucrative to Nigeria's leadership. They know that their cut is not as big as it should be, as the newspaper headlines carry news like the sale of Nigeria's Akpo field to China's CNOOC. The seller is a former government official who had taken control of the land in question while in office and then kept it after joining the private sector.
On January 11, a group of previously unknown Ijaw militants called the Movement for the Emancipation of the People of the Niger Delta kidnapped four foreign oil workers. Today, those workers were released, though the ransom demand -- to free two jailed Ijaw activists -- was not met. However, reports indicate that the MEPND did not let the workers go for free - a payment of $770,000 was made to the group.
A South Korean oil company had its offices looted Sunday to the tune of $300,000, and more unrest is sure to come. The Ijaw and other natives of oil-rich regions worldwide make no secret that they want compensation for the use of their lands. They also want life without the oil slicks, towering fires, and other unpleasant byproducts of extraction. Placating them while companies dig deeper across ever-wider swaths of land will not be easy politically or financially.
Though the four men abducted in Nigeria were freed, the Ijaw fighters still hold hostages - all of the world's oil consumers must essentially pay a ransom each time Shell or another company cuts production, each time western governments are forced to prop up crooked regimes for the sake of energy security and stability, and each time drivers fill up for their morning commutes. $70 a barrel is upon us.
- Sam Hopkins
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