Why Nigeria Should Not Be Too Excited About Rising Oil Prices
Global oil prices are rising. As at Thursday, crude oil traded at about $69 per barrel.
A crash in the global oil prices in 2015 eventually brought Nigeria’s economy to its knees. The economy had to endure a grueling recession for most of 2016 and 2017 – the first in 25 years and the country only started making recovery as the oil prices started picking up, towards the second half of 2017.
The rising price should be good news for Nigeria, right?
“Well, not necessarily,” says an energy expert in a chat with Bounce News.
Nigeria, he believes, should not be too excited about the rising prices.
Here are his reasons:
1. Nigeria Is Still Importing Fuel: “The increase in dollar earnings that we get from exporting crude oil is used mostly on financing imports of refined petroleum products. You see, once the crude prices increase, the price of refined petroleum products also increase.
"So, this rise in price does not necessarily means that the country will make more money,” said the expert who didn’t want his name mentioned because of his position in government.
According to him, unless Nigeria fixes its refineries and begins to refine its own petroleum products, it would be difficult to benefit from oil booms.
2. Nigeria’s Oil Output Is Low: Nigeria’s oil output currently hovers around 2 million barrels per day.
On this, the energy expert said, “For decades, the output has been around this region. Is it impossible to get beyond this? Well, that is where we look up to the Petroleum Industry Bill to come in.
"The downstream sector needs to be opened up so that Nigeria can have more output. It is difficult to see how we can benefit much from increase in prices with low output.”
3. Logistics of Crude Drilling Is High: According to the Energy analyst, what it takes to produce the crude oil is what determines whether the entire oil and gas exploration business is profitable or not.
“For every barrel of oil you get, what determines its true value is the cost of logistics. How much did you spend in getting it? And this also depends on how easily accessible the crude is. It depends on whether the crude is on the surface, deep water or ultra-deep.
“The logistics of deep water drilling is not the same as ultra-deep at more than 3,000 feet below the sea. So, you see, when you talk about oil price, a whole lot of factors come into play,” he explained.
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