Oil Energy Money

Picture courtesy of ABC News

While the financial markets experience a confidence meltdown, Nigerian Oil facilities may face a more literal meltdown. 

Militant rebel group  Movement for the Emancipation of the Niger Delta (MEND, ironically) have declared war on the oil rich country and promise to “bring [oil] structures to the ground.”  You may remember MEND from their ‘destory-and-kidnap’ attacks on international oil companies operating in the oil rich region over the last two years. 

On the 13th of this month, MEND members stormed Shell’s Alakari flow station with dynamite and rocket propelled grenades, damaging the facility, killing a guard and wounding four workers.  Shell has evacuated at-risk employees and shut down production in some facilities but refuses to give exact details due to ’secuirty considerations’. 

Shell faced another attack on its Soku gas plant and Chevron confirmed reports of shooting near its Robertkiri facilities.  MEND has now threatened to attack oil and gas-loading vehicles such as long distance tankers.  The rebel group claims to want a higher percentage of government profits from oil, a reasonable demand considering 70% of the Niger Delta region’s residents reside on less than $1 a day.  The group has stated it will continue its assault “until the government of Nigeria appreciates that the solution to peace in the Niger Delta is justice, respect and dialogue.” which is rich coming from a group most often pictured wearing balaklavas at machine gun mounts on armored vehicles (see above).

Investors are clearly spooked by the greater financial turmoil because such attacks would previously push prices up by $2 per barrel on supply concerns.  Risk-averse investors are now pushing their money in to bonds and other safe products but the 7 month low price of 93.18 surely does not factor in the long term supply disruptions MEND promises.

However, whether the rebel group instigates a civil war should not be decided by the price per barrel of oil.  If MEND represents the common people whom the government has royally screwed over then perhaps it is wrong for international oil companies to interfere.  Damaged plants can be repaired, but the lives of residents can not.  Government co-operation with MEND may produce a better standard of living for residents of the Niger Delta, in turn improving performance at oil facilities.  But things will clearly get worse before they get better.  Or they’ll just get worse.  Either way, Oil Energy Money predicts serious supply disruptions in the region.