A striking headline across the world yesterday was the rise in the price of Brent crude by which other brands of crude oil are determined in price terms. It climbed to $50 and above this week for the first time since last year. It is the exceptionalism of crude oil for a commodity widely believed to be on its death bed to still hit global headlines, the sort of game it has played with humanity since its rise to absolute eminence in the 19th century. It is the logic behind Financial Post columnist, Peter Tertzakian’s assertion that “…oil is a stubborn tree-climbing animal. Just when you think that you’ve trapped it from rising higher, it gets away on you and keeps climbing”, (Nov. 16, 2016)). He could be right but how long that game would go on is the issue in question now, with unofficial but informed statistics among industry watchers pointing at a price crash to as low as £15 or approximately $20 per barrel of oil in 2018 and a key actor such as the Financial Times of London says oil is on borrowed time even as demand is growing and the price is rising.
Similarly, global players such as Bob Dudley, the Group Chief Executive of BP commented in June 2017 that “While welcome, it is not yet clear how much of this break from the past is structural and will persist” The breaks from the past which the chief executive of BP was not sure was structural or just a happenstance is the phenomenon of renewable energy being the fastest-growing of all energy sources, rising by 12%” in 2016. Although this % is put at just 4% of total primary energy, the growth is calculated to represent almost a third of the total growth in energy demand in 2016.
Spencer Dale, BP’s Group Chief Economist put it most starkly: As in 2015, the strength in overall oil demand disguised a tale of two products. Consumption growth was concentrated in consumer-led fuels, such as gasoline and jet fuel, buoyed by low prices. In contrast, diesel demand, which was more exposed to the weakness in industrial activity, including in the US and China, declined for the first time since 2009”.
Both Dudley and Dale were speaking at the presentation of the 2017 edition of BP Statistical Review of World Energy. They speak to issues of volatility, emergence of new decisive consumers (China and India) and the climate change factor, all of them working out in such a way that translate to a sort of troubles in form Six of the global energy market with particular reference to crude oil. The question of whether the changes being witnessed are structural or not is thus regarded as no more than the coded and ‘mature’ manner that the head of BP must exercise his powers.
For, there are other signals in what some big cities are planning in terms of restricting the city space to only electric cars as from 2020. London is one such city. Other cities have their own plans. Meanwhile, 2020 is just three years from now and it is also the target date the European Union, for example, had set when 20% of all energy within its space must come from renewable energy sources, a target some European countries have already overshot. Denmark leads this pack of new energy completeness.
No one has successfully imagined what the world or what life would look like without crude oil – transportability, cheapness, multiplicity of bye-products. In fact, oil has its price in global politics. The world is still lost on what other energy source in the emerging energy mix can replace crude oil for humanity. Silently, however, everyone appears saying this is the geopolitical moment the world has been waiting for – the death of oil. As difficult as it is imagining what other commodity can replace oil in the energy mix, the violence, the conflicts, the wars, the deadly struggle for power and the oppression that oil has brought on the world has deconstructed it.
No one can predict how smooth or otherwise the transition from fossil fuel would be. It may not be that smooth but it is believed the period after it would usher peace, with many conflicts resolving themselves, so to say, once the profit minded shadow parties behind most conflicts across the world disappear as soon as the oil profit consideration is no longer critical. This is the background against which it makes sense to talk of the funeral of a crisis commodity.
Nigeria is one oil producing country where this funeral might record the audience with the largest interested actors- from the rump of statists in the bureaucracy and among the power elite to pure speculators and buccaneers as well as genuine investors. For one, yesterday or July 26th, 2017 marks the first anniversary of President Buhari’s orders to Nigeria’s state owned oil company to expand search for crude oil. The Punch reported him on July 26th, 2016 under the headline: Fast-Track Oil Exploration in the North, Buhari Orders NNPC”. Two, the Acting president, Yemi Osinbajo has just drummed it into the ears of the African continent that the days of the irrelevance of oil are here. Three, a Nigerian senator has mounted an advert on the death of oil although, in his own case, it is in support of a restructuring debate that is specific to Nigeria. Fourth, oil has been at the heart of instability in Nigeria, from a civil war to series of coups, unbelievable level of corruption and current standstill over restructuring. Five, it is an African country and, therefore, a victim of the paradox of plenty. Six, oil is a mercurial raw material capable of playing game on humanity. It could still be a case of ‘crude oil is dead, long live crude oil’. So, what does a Nigeria do?
Nigeria is in the situation called a dilemma – typified by musician MC Hammer’s ‘Too hot to handle, too cold to hold’ lyric. Nigeria’s energy industry sector is the most sophisticated on the African continent, one of the very few which is managed by the Nigerians, where any other player does so under the professional,administrative or political leadership of the Nigerians. So, the national identity, the infrastructural and the financial stakes are that high. But so is the investment required to modernise the infrastructural underlay, put by some sources at N250billion. So, which one is to be abandoned? Is it the already existing vast outlay or the investment required to take it to the next level?
Two, with decarbonisation target of 2050, which foreign investors are going to plug in more money into the oil sector in Nigeria without guarantee that it can recover investment before the target date? In the absence of domestic investors with the capacity or the enthusiasm and with a business model of rolling back the state, what happens?
Nigeria’s third dilemma is the world oil market. In assuming the current global power configuration, the market is shut against countries such as Nigeria. European market is for the taking between the United States, (coal and gas, with oil following soon); Russia, (the traditional European supplier) and China, (in renewable energy which it is the market leader). Nigeria can find market in Asia where India is the main customer now but that is if Saudi Arabia and Iran are not even more powerful sellers than Nigeria. The problem here is compounded by the production capacity differential between each of these countries and Nigeria. The US, Russia, Saudi Arabia are shooting above 10 million barrels daily. It is only Iran that is in the same range as Nigeria in terms of the potential to fly at four million barrels daily. While Nigeria’s current internal condition prevents thinking about four million barrels, Iran is not thinking so too for a combination of reasons. In terms of very modern infrastructural facilities, Nigeria is very low down in relation to each of these other countries even as sophisticated as its oil industry by African standards.
Nigeria has a vulnerability to the power of transnational corporations that is unique to it but only the transnational oil companies have the technology to extract Nigeria’s oil recesses, a lot of it now onshore except if oil materialise in the northern part of the country. This is the fourth dilemma while the fifth dilemma is Nigeria’s huge population. While the population is so huge that it makes hanging on oil risky, Nigeria can also not do without oil, at least as the source of money with which to develop agriculture. Of course, Nigeria is not immunised against climate change restrictions, making the sixth dilemma.
There is a seventh dilemma which comes from the writer’s personal experience. February 2009 was local government election time in Jigawa State. As usual, it was planned that the campaign be well covered by the media as a key witness. That meant inviting very senior journalists to reinforce the resident correspondents. The electioneering campaign was usually a very gruelling exercise, entailing touching every hamlet or so. Although Jigawa had not been a new place to one, it was the first time one was going that far into the depth of the rural area. It was the same thing for the visiting journalists who, in response to the briefing, were also stunned that oil money was completely absent from the rural areas. Is this corruption, I was asked by the flabbergasted editors coming with notions of the barren north where all of Nigeria’s oil money went only to find no expression of oil money around. Corruption over the years could be part of it, I would say but quickly add how oil is also inherently about an enclave economy – exclusionary of the vast majority who are not key to its dynamics. And the exchange would almost always lead to everyone saying that, at the end of the day, agriculture is the saving grace.
The state government at the time certainly went along that line, starting with a process of listening to the narrative of poverty by those who suffer it instead of well fed elite articulating what they themselves were not experiencing. That was the Jigawa Talakawa Summit. It is trite to say that the Jigawa situation is basically applicable to not only the entire northern Nigeria or Nigeria itself but also all other oil producing countries in Africa. Most readers would recall Emily Wax’s March 13th, 2004 sensational piece in the Washington Post depicting the exclusion from the benefits of oil in countries such as Niger Republic, Chad, and Cameroun. The story has not changed since the publication of that piece 13 years ago if evidence from recent survey by African experts are anything to go by. In other words, oil is exclusionary and alienating of the bulk of the population but agriculture which is inherently inclusive and redistributive is not what the elite want to develop.
What might be Nigeria’s options? A group of people at an informal session in Abuja were taken aback when President Buhari ordered the NNPC to fast-track oil exploration in 2016 as referred to earlier. As one of the discussants wondered, how is oil going to benefit the north? How won’t those with the technology and the finance bring the money and colonise the entire process, leaving agriculture stranded again? Although the geopolitical dimension of the Boko Haram insurgency that foregrounded the Buhari regime was noted by the discussants in relation to the attention to oil in the Chad basin, these questions were the push for one of Intervention’s earliest stories titled: Does Northern Nigeria Need Oil” in which, a former minister, a leading Political Scientist, a key Sociologist, an NGO activist and an energy scholar were interviewed. In part two of this report, the interview is reproduced as a response to the question of what options are open to Nigeria. Although the respondents were asked specifically on whether the north needed oil, the answers are equally relevant to the question of resolving a strategic dilemma. There are views in the interviews that speak to the puzzle of whether the impending death of oil would, paradoxically, reconcile Nigeria, make the country come to a more collectivist, systematic and frontal engagement with the imperative of the agrarian revolution.