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The End of Oil: An Inconvenient Truth By Rev. Fr. Paul, Irikefe

January 25, 2013
Since 1958 when Nigeria began oil production, the story of the country has followed a skewed trajectory dictated by powerful interests. It has spawned a nation with the highest turnover of political leadership in Africa, of coups and counter-coups, with a bloody civil war, a corrupt, inefficient, greedy, and ostentatious class of elites, and above all, an economy that is purely rentier and a politics that is overly prebendal. Oil, as one analyst puts it has made Nigeria a parvenu, puffed up by petro dollars.
But this trajectory may be about to change. The world is poised for a new global energy order, one that will send shockwaves, and confusion to ‘petrolist states.’ Indeed a big, power shift is underway, whose ramification and magnitude we are yet to fully comprehend.
The revolution actually began in 1948, but only recently did other technologies emerge to make it a reality. Today with remarkable precision, hydraulic fracturing and horizontal drilling have been combined to unlock the extensive gas and oil trapped in “source rock” – rock from which oil and natural gas slowly migrated into traditional reservoirs over millions of years. These unconventional energy resources have already been found in significant quantity in the U.S., Abu Dhabi, Algeria, Argentina, Australia, Canada, China, Colombia, Germany, India, Indonesia, Mexico, Oman, Poland, Russia, Saudi Arabia, Ukraine, and the United Kingdom. And according to the International Energy Agency, recoverable reserves of shale gas are present almost in all country.
The global energy glut as well as the economic and geopolitical consequences is already beginning to dawn on the world, beginning in the United States. The International Energy Agency (IEA) has again predicted that the United States, thanks to this revolution in shale gas and oil, would surpass Saudi Arabia and Russia to becoming the world’s largest oil producer by 2020. And it is clearly en route to being a net exporter within the decade.
Being the biggest importer of Nigeria’s crude oil (a little less than half of our oil export), this is bad news for the country. Already American oil import from us last year slumped from 810,000 barrels to 361,000. Says, Dr. Ngozi Okonjo-Iweala, the co-ordinating Minister for the Economy and the Finance Minister, “the discovery of Shale oil and gas in the U.S. are long-term fundamental factors that we must pay attention to. Nigeria cannot afford to bury her head in the sand oblivious to changing energy trends in the world. It is in our best interest to respond proactively to these trends. The consequences of not doing so could be very unpleasant not only for us but future generations too.”
But some are already arguing that there is no cause for alarm, that the left over oil slice will go to Europe and Asia, and there is no reason to our being overly worried. Indeed, that appears comforting and reassuring, except that it is dangerously false and misleading. The truth is that China’s growth will soon taper off with its hunger for energy, and its reserve in shale and tight-oil resources surpasses that of even North America by 50 percent. China is poised to leverage on this energy advantage as America, relying on its energy boon, grows more competitive and prosperous.
Clearly a world of increasing energy independence and falling oil prices will be tremendously painful and undermining for a country that operates an exogenous economy, that derives about 95% of her foreign exchange earnings and about 65% of her budgetary revenues from oil and gas exports. Indeed, the sharp swing in oil prices do not just affect the international system, it has always led to regime insecurity in this nation. It did this in the oil embargo of 1973-1974 following the Yom Kippur War. The sudden sharp rise in the price of oil led to so much money, and the recalculation of power for Gowon, resulting in a military coup that brought in Murtala Mohammed/Obasanjo-led government. It did this too in the oil price shock of 1985/ 1986 that brought in a counter coup against Buhari, and so on.
But the most troubling implication will be that Nigeria may officially be transitioning out of her golden age –roughly from 1958 to the middle of this decade – with nothing to show for it. Unable to further subsidize corruption and use petrodollars to buy consensus and vote, to settle disgruntled parties and cronies, and to deny us freedom and good governance, dignity and a decent future, it remains unclear whether the system, a system that the elites have always insisted to be priceless and non-negotiable despite all evidence to the contrary, can still hold.
Nigerian government at all levels may have to respond choosing between the devil and the deep blue sea. First, they may choose to absorb the financial and social pressure that this brings and so bear the cost by cutting down on frivolous spending, maybe by cutting down on their wages and emoluments, for example, cutting down on what members of national assembly earn or by making sure that 2.3 million naira is not spent daily for refreshment in Aso Rock. But that is most unlikely. A culture of sacrifice does not appear to be in abundance in Aso Rock.
Therefore a more likely scenario would be to push the cost to the Nigerian people by raising taxes and other forms of revenues. In other words, without the incentive to drill into the ground anymore, government may be forced to drill into the minds, creativity and entrepreneurship of the people, and that could be the game changer. It will call for a new form of leadership, where contracts will be respected; foreign direct investment will be sought, and government will be for the people, and by the people.
Hopefully, we may also be able to demand a better deal by trading taxation and political order with voice and political freedom. It will be an era that may demand a new-breed politics and politicians with vision, clarity and character to lead this nation to its long denied destiny. The prospect of a Nigerian spring has never been more real, alive and terrifying.
Rev. Fr. Paul Irikefe is a priest from the Catholic Diocese of Warri, and can be reached at Ovoekene@yahoo.com

Source: http://www.chidoonumah.com

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