November 24, 2013 by Odilim Basil Enwegbara
The debate over the oil price benchmarking for the 2014 budget has become contentious to the extent that President Goodluck Jonathan has suspended, for the second time, the presentation of the 2014 Appropriation Bill to the National Assembly. The Minister of Finance, Dr. Ngozi Okonjo-Iweala, now is in a war of words with the lawmakers for daring to disagree.
“…Lest we forget, as recently as 2008, oil prices crashed from a peak of $147 per barrel to $35 per barrel in a space of months triggered by the global financial crisis. Is the minority leader (Hon. Femi Gbajabiamila) saying he has forgotten that?”
Having difficulty explaining to her IMF-World Bank imperial colleagues why she allowed the oil price benchmark of $79 per barrel in the 2013 budget to scale through, Mrs. Okonjo-Iweala is now determined not to allow that to happen in the 2014 budget.
Not even Obama was left out in this fear mongering that soon African countries would have no market for their oil, when during his recent African visit he said, ‘’You know what, we, Americans, don’t need your African energy.’’ But surprisingly, it’s the same Obama who in 2009 rushed to Ghana to negotiate big oil deals for ExxonMobil and Chevron.
Given this endless false alarm about the impending plunge of the global oil price, and the fictitious sheer effects it’s expected on our country’s macroeconomic fundamentals, let me reiterate here that their so-called plunging argument is what the imperialists use annually to goad us into keeping a chunk of our oil revenues in their western banks so that they could use it for their own development. Of course, doing that, they are fully aware that, starved of critical infrastructure funding, our economy should remain in perpetual stagnation.
By fabricating economic doom and crying wolf during every year’s budget, Mrs. Okonjo-Iweala has succeeded in forcing our lawmakers to allow her, thanks to the illegally and unconstitutionally operated Excess Crude Account, to have a chunk of the country’s oil revenue at her disposal to play around with, including funding her Sovereign Wealth Fund.
But she forces lawmakers to allow her have her way, let me repeat as I did last year, that there’s no way the global oil prices should ever go below $100 per barrel in 2014.
First, global oil prices are never supply-demand determinant, but rather are Washington-Riyadh constructed and manipulated. A US-Saudi indivisible marriage secretly made on February 3, 1945 by the US President Franklin D. Roosevelt and Saudi Arabia King, Abdul Aziz ibn Saud, made the world’s number one military power to agree to provide the world’s richest oil kingdom military protection in exchange for its vast reserves to act as the petrodollar backbone. Washington’s keeping of dollar reserve currency dominion unchallenged, requires global oil prices to be kept as high as possible, especially since 2010 as it injects annually $1.20 trillion printed dollars into its economy in the name of quantitative easing.
Second, since moving from ‘gold-dollar’ to petro-dollar in 1973, keeping the global oil prices as high as possible (or as low as possible as it was needed in the 1980s to destroy the Soviet oil-export dependent economy) has since become America’s only way to force the world scramble for petrodollar and by so doing, continue picking its bloated annual deficits, particularly its military and social security spending.
Since fully recovered from the US efforts to strangulate its economic and military, which was started in 1998 but finally crashed with the crash of the US economy in 2008, Beijing seems also to be the last to want global oil prices to plummet.
First, with the plugging oil prices meaning also the plunging of the dollar, Beijing is fully aware that that would spell doom for China’s decades-long unstoppable export-driven economic growth. In fact, as the world’s manufacturing workshop, keeping global oil prices as high as possible is keeping the dollar revenues of the oil exporting countries as high as possible for their citizens to continue buying made in China. But, reduce the global oil prices, Beijing knows, would trigger massive factory closures with millions of jobs, the social consequences of which could only be imagined.
Second, yes, China wants yuan to replace dollar as the de facto reserve currency, but Beijing also recognises that it needs more time to put the right financial infrastructure on in place, or else a global premature rush into yuan, as a result of the sudden plunge of oil prices and the accompanying collapse of petrodollar, would spell doom for the yuan.
Thirds, without maintaining the current petrodollar status quo, Beijing doesn’t need to be told that China’s $3.7 trillion dollar-denominated foreign reserve risks becoming worthless.
So, the so-called sudden plunging of global oil prices is another baseless alarm that should be ignored by Nigerians, and particularly our patriotic lawmakers, for the world is increasingly having supply problem than demand problem, especially as hundreds of millions of China’s 1.35 billion citizens and India’s 1.2 billion people become car and large home owners.
In other words, it is worth considering that as the global economy shifts from West to Asia, so will the appetite for global oil shifts from the West to Asia. Therefore, the booming domestic consumer markets in China and India are only the beginning of the four decades-long future growth in the demand for global oil. And it is this rise in price that now makes the US and Canada, homes for shale oil to begin exploiting it since below $80 per barrel in the global oil price shale oil is unprofitable.
This brings us to the baseless argument about the danger shale oil poses. In fact, the finance minister’s argument that shale oil will soon bring down the global oil prices only exposes how ill-informed she could be. But that she went as far as linking that to global oil prices’ chances of plummeting in 2014, as ‘’oil prices crashed from a peak of $147 per barrel to $35 per barrel in a space of months’’ which was ‘’triggered by the global financial crisis.’’ It was good that she linked the 2008 oil price plunge to global financial crisis.
But the contradiction became obvious when she didn’t say that in 2014 the world would be expecting another financial crisis. What baffles me always about the minister’s usual economic arguments is this display of lack of understanding of how the global economy works, let alone the politics of global oil pricing.
Shale oil, which is entirely confined to North America, according to the recent International Energy Agency studies, as contained in its annual World Energy Outlook, which is entirely confined to North America only grew to two million barrels per day in 2012 and only to grow 5.8 million bpd by 2030. This means that worldwide production of Light Tight Oil from shale and other formations requiring fracking, will hardly account for more than six per cent of global annual oil and liquids production over the next 20 years.
‘’Very soon,’’ the finance minister recently argued, ‘’the US would become a net exporter of oil…’’ forces one to wonder from which source should the US become that net exporter of oil, given that the US daily oil consumption is 18.7 million barrels with (10.6 million of which imported daily in 2012)? Or, should it be from the same shale oil which the IEA demonstrated to be mere two million barrels? In other words, given the IEA global oil price trajectory, can’t we agree that “There are many constraints on supply keeping pace with demand’’ which means that within this decade, oil prices should always hover around $125 per barrel?
For these reasons, one is certain that our lawmakers should not allow themselves to play into the hands of the imperialists for they own the people they represent the duty of safeguarding the country’s economy from economic hit men and women pretending to be ‘’crying more than the bereaved.’’ As the custodians of our commonwealth, they should benchmark the oil price for the 2014 budget at not less than $85 per barrel.
They should do so recognising that ours, being light and sweet, remains the world’s most sought after crude. Not only because it is sulfur-free, carbon-low. Bonny sweet and light crude is sought after for it’s easy to refine, produces more gallons per barrel, more mileage per litre, and above all, has high octane number which guarantees maximum performance with low knocking and pining engine effects.
If theirs is not a false fear, how come rather than the US Environmental Protection Agency’s vehicle emission uses Nigeria’s Bonny Light instead of the Texas oil? Or, isn’t it for the same reason that Chinese cities such as Shanghai, Beijing, Hong Kong, and Shenzhen, as well as Indian cities such as New Delhi, Mumbai, and Bangalore can’t do without our oil, and are eager to replace the US in patronising it?
Copyright PUNCH. All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.