America's LargestNigerian Unrest Cuts into Oil Production for Fifth Consecutive Month, Shell Reports
A MEND rebel figher in Nigeria. (image: welt.de)
It’s a story all too familiar: a developing nation has a plethora of natural resources; however, a confusing and violent political quagmire prevents this country from being able to gain wealth from the gifts it has been handed.
In the past, these situations were nothing more than stories on the back pages of newspapers. But in today’s interconnected world, what happens on another continent can directly effect what happens here. And those effects include the price of heating oil.
Today, the country in question is Nigeria, Africa’s most populous nation. Since gaining independence from the United Kingdom in 1960, Nigeria has been wracked by violence, corruption and instability. The presence of large reserves of oil offers the nation a glimmer of hope for political and economic stability; however, the resources have been so mishandled that it has only made the situation more difficult.
Most of Nigeria’s oil is located in its delta region. A militia group, The Movement for the Emancipation of the Niger Delta, better known as MEND, has a big presence in the area. MEND’s stated mission is to bring the wealth generated from oil production back to their home region; however, others have labeled them terrorists that simply want to take the oil wealth for themselves. MEND and Nigerian military forces have been at odds for years. MEND’s repeated attacks on oil pipelines and oil-thieving bandits have prevented oil production from reaching anywhere near its fullest potential.
Case in point: Royal Dutch Shell announced that, for the fifth month in a row, oil shipments from Nigeria were disrupted, Bloomberg reported yesterday. Shell had expected to produce over 200,000 barrels of oil a day from its production facility. But, due to the damages to the region’s pipeline, it will be unable to do so. Just last year, Shell was producing 360,000 barrels per day. As reported in February on The HEAT Zone, smuggling and disruptions in Nigeria costs Shell $1.6 billion a year.
Shell is not the only major oil corporation harmed by the problems in the Niger Delta. Last year, Chevron produced 360,000 barrels per day. They now produce 100,000 fewer barrels due to attacks made on the firm’s property.
And this has a direct impact on home heating oil costs. Nigeria’s oil is light sweet crude, the most-traded physical commodity on NYMEX. Any decrease from Nigeria’s output reduces the world’s supply; as a result, prices for crude oil rise. And since home heating oil is an end product of crude oil, its prices rise, too. And this eventually ends up on your home heating oil bill.
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