Oily lessons from Saudi Arabia

Last week, this column touched on the crisis of fuel supply in the country and the notable incongruity of having a so-called ‘oil-producing’ (really, the precise term should be ‘rent-collecting’) nation that cannot refine its crude domestically but has to engage in the neo-colonial and economically ruinous practice of round-tripping its crude abroad from where it shamelessly re-imports same as finished petroleum products!


This week, we may have gone elsewhere but the reality of the fact that just like was the case with NITEl and the telecommunications sector, nothing would really change until we dismantle the NNPC behemoth, compels us to remain on that page in the hope that over time we will achieve the required critical mass to dislodge the beast.


Oil is politics and for a mono-dependent economy as ours, it quickly moves the subject to the realm of political economy. As is evident presently, Nigerians and indeed the rest of the world have been at the receiving end of dislocating oil prices in the past few months. So malevolent has its effects been that the naira has since spiraled from an exchange rate of N151 to the dollar to a current figure in the range of N227!


This has come with collosal effects. As we write, the Jonathan administration and the National Assembly have continued to tinker with the 2015 budget in which revenues are largely predicated on crude oil sales. States can hardly meet salary and pension obligations even as 2015 may sadly yet turn out to be our leanest year yet in much needed capital projects and infrastructure upgrades. At the personal level for citizens, the value of N1 this time last year hovers between 50 and 70 kobo even as Africa’s richest man, Aliko Dangote has tumbled some 40 paces on the world’s richest rankings. Of course, foreign investors, clinical and unemotional portfolio managers that they are, have since scrammed, waiting to someday return when you would have sorted yourselves out! And ‘thanks’ to a leadership hiatus, organized labour has not sent its already indicated wage review invoices to government at the moment, but wait for it, it is coming! And with all its implications too!!


When many analysts explain the problem, they put it on the doorsteps of the now traditional ‘general downturn in the global economy.’ But they need to be more precise: this current crisis has its roots in the Middle East, and precisely in the kingdom of Saudi Arabia, the acknowledged biggest producer of crude oil in the world today.


The land remade in the 1920s by the then fundamentalist House of Saud has over time been largely made famous by the annual convocation of the muslims at Mecca and Medina for the hajj. Within the conclave of Arab politics, it has also been seen lately as a conservative political monarchy as opposed to the theocratic rule of the mullahs in Iran and the jackheads of ‘Islamic State,’ Al-Shabab and Boko Haram. Then there is the issue of the opportunistic relationship between its leaders and the Washington establishment which has helped the West secure a critical political foothold in the Gulf but deeply infuriated regional power contenders and Ottoman empire revivalists like Al Qaeda and Hezbollah.


Oil as politics
In the 1970s and 1980s, the West, whose production and growth machines have for over a half century been closely tied to crude oil as a critical energy source, pushed all of its buttons to ensure that crude oil prices fell. Oil producing nations, including the single largest producer of all, Saudi Arabia, saw their revenues decline massively. It was not funny.

It was particularly most difficult for the Saudis who, on account of their closeness to the leaders of the West, were being vilified in the Arab world as traitors to the oil producing nations, the Arab world and the beneficial interests of muslims. To mitigate some of this, the Saudis used their clout in the Organization of Petroleum Exporting Countries, OPEC, to galvanize a campaign to resist free-falling oil prices through measures like national production quotas


It is leadership, stupid!
One man’s meat it has been said is another man’s poison. For years, the Saudis were content to remain as shock balancers in the global economy as it has to do with oil. Recently however, their patience has literally snapped. There is a limit to how much you can pumell a dog without it responding.

The point of vexation is in the threat of an imminent end to the reign of crude oil as the single most dominant fuel source in the world, thanks to continuing progress in the research and development of shale oil and other energy alternatives. Should this come to full fruition, the Saudis risk not just a return to the tumultuous 70s and 80s but also an even more uncertain future where their crude would no longer be king. So this is a fight between crude and shale and the worst hit nations in the debacle are those like Nigeria who on account of having no strategic vision in the entire process, are mere bystanders. Pity the nation….

It is one thing to be beaten today. It is however something else to see tomorrow’s trouble coming and do nothing to avert it. Nigerians, your vote is your power; this weekend, use it wisely. It shall be well with our nation.