EnergyDay Editorial Board
Last week, the media was awash with news of the United States’ President Joe Biden’s administration’s request, urging OPEC and its allies to boost crude oil output. The call is coming on the heels of the U.S’ interest at tackling rising gasoline prices which the Biden administration perceived as a threat to global economic recovery.
For us at EnergyDay, the request reflects the White House’s willingness to engage major world oil producers for more supply to help their industry and consumers, even as it seeks the mantle of global leadership in the fight against climate change and discourages drilling in the U.S.
It’s our opinion that for Nigeria, the concern should be how to exploit the opportunity in the renewal of interest by the U.S. to increase crude oil import. The government of the day should concern itself with how Nigeria as a member of OPEC can tap into this request to boost the economy, more so, now that the country is in need of funds to drive its infrastructural development.
Our policy makers, industry managers must look beyond the request and locate the advantage and opportunities for us not only in terms of mere increase of production and supply to the United States but also on how to get their companies such as ExxonMobil to take interest in bringing fresh investment into the country but in the upstream and midstream sector. Specifically, they should be encouraged to participate in the effort of the federal government to rehabilitate the existing refineries or establish new one.
There is a need to embark on serious economic diplomatic shuttle initiative by the Nigerian government now given that the US used to be the biggest buyer of our crude until recently when it ceased to be.
Biden’s administration is new, and in any case such diplomatic manoeuvres ought to have started early in the life of the administration. For us, it is not too late in the day.
Biden’s national security adviser Jake Sullivan, had earlier criticised big drilling nations, including Saudi Arabia, for what he said were insufficient crude production levels in the aftermath of the global COVID-19 pandemic.
“At a critical moment in the global recovery, this is simply not enough,” Sullivan said in a statement.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, had implemented a record output cut of 10 million barrels per day, about 10% of world demand, as global energy demand slumped during the pandemic. But it has gradually raised output since, with the cut eased to about 5.8 million bpd as of July.
We are aware of the underlying reasons for Biden’s concern given resentment and internal tensions in the United States over rising prices of gasoline as a result of the shortages.
EnergyDay is more than convinced that now is the time for Nigeria to exploit the abundant opportunity implicit in Biden’s admonitions to the OPEC to maximum advantage. This kind of economic opportunism is good for our economy especially at this period of COVID-19 and a growing slump in the economy.
Protection and advancement of economic interest is the bedrock of international politics and relations, the success of any nation can in part be measured by how far, and to what extent, she is able to advance these interests.
It is a given that we have comparative advantage in oil and gas, as a critical element that we can weaponise at the international arena, but it is the belief of this medium that in this regard, we are yet to push and pack our punches. Interestingly, some critics have attributed this underwhelming influence in global oil politics to a reflection of poor leadership at national level, as well as abysmal governance structure that underlines the nation’s oil and gas industry.
In July this year, OPEC+ agreed to boost output by 400,000 bpd a month starting August until the rest of the 5.8 million bpd cut is phased out. OPEC+ is scheduled to hold another meeting on Sept. 1 to review the situation. We must therefore, make move to our advantage before others push us to the background again.
Truth is some critics have observed that our voice in OPEC is often muffled and not strong enough despite having one of our own, Dr Mohammad Sanusi Barkindo as the scribe of the oil cartel.
In the case at hand, the litmus test should come from how well we are able to get the United States back to our fold as the biggest buyer of Nigeria’s crude oil.
As earlier stated, allied to this is the core issue of the state of our refineries. As the U.S. government is showing concern over rising cost of gasoline, ours should come to the reality that payment of subsidy on refined petroleum products at the expense of other pressing needs cannot continue.
At EnergyDay, we are aware that powerful interests may have by behind the inability of the successive administrations to get our refineries in shape, those currently saddled with power should know that cutting costs which can only be achieved by getting our refineries back to shape is the only way forward and the glorious path to economic nationalism.
A nation can not grow when the interests of individuals, no matter how powerful are superimposed upon national interest.
U.S. gasoline prices are running at about $3.18 a gallon at the pumps, up more than a dollar from last year at this time when the pandemic sapped travel demand, according to the American Automobile Association.
White House press secretary Jen Psaki said the outreach to OPEC+ was aimed at long-term engagement to end anti-competitive practices, not necessarily to garner an immediate response.
The unusual statement ratcheted up international pressure and comes as the administration tries to contain a range of rising prices and supply bottlenecks across the economy.
The message also underscored the new dynamic between Washington and OPEC since Biden’s predecessor, Donald Trump, broke with prior practice in demanding specific policy changes from OPEC to adjust prices. Trump had threatened to withdraw military support from OPEC’s de facto leader Saudi Arabia over output, which at the time he thought was too high and hurting U.S.-based drillers.
Global benchmark Brent crude gained more than 1% to over $71 a barrel on Wednesday. That is lower than the prices above $77 in early July, but still represents an increase of nearly a third from the beginning of the year.
As the U.S. pushes for lower price, we encourage the Nigerian government to immediately start discussion with the Biden’s administration on how to restart supply but the Buhari’s administration should be courageous enough to negotiate on favourable terms.