Stakeholders express fear over dwindling price of crude oil

Some stakeholders in the oil and gas industry on Friday expressed worry over the dwindling prices of crude oil in the international market.

They said in separate interviews with the News Agency of Nigeria (NAN) in Lagos that the implementation of the 2014 budget would be affected with sustained slide in the price of crude oil in the global market.

Mr Simon Adeola, Managing Partner, Energy Window Consultants, said that the 2014 budget was based on reference price of 77.5 dollars (N12,457.5) per barrel with the understanding that the volatile market could remain stable for the greater part of the year.

Adeola said that the Organisation of Petroleum Exporting Countries (OPEC) basket of 12 crudes, including Nigeria, had suddenly dipped from 85.93 dollars (N14,178) per barrel to 85.14 dollars (N13,883) per barrel.

He said that government’s fear was based on the fact that the latest price was a little over eight dollars in excess of the nation’s 77.5 dollars (N12,457) per barrel reference price of the nation’s budget.

“The crash in crude oil price constitutes a serious threat to the execution of 2014 budget.

“Any further drop in price would affect the capacity of Nigeria which depends mainly on crude oil to generate funds for the budget,’’ he said.

Mr Charles Fashola, Managing Director, Seacof Engineering Ltd., said that the effect of the decline in crude oil price would grossly impact on Nigeria’s economy.

Fashola said anytime the crude oil price falls, it usually had negative impact on the stock market.

He urged the Federal Government to adjust the macro-economic variables to ensure stability, adding that the government should allay public concern over perceived macro- economic stability.

“It was discovered that for oil prices to go up, there has to first be a production shut-in by all OPEC members, including Nigeria and other producing countries.

“Right now, no country is willing to spearhead the shut-in (reduce supply) because this is currently a price war and a fight for market share.

“Secondly, to try and solve the problem locally, the federal government should look towards refining locally, and become the central supplier of refined product to West Africa at least,” he said.

Another stakeholder, Mr Patrick Andrew, an energy consultant, said the sudden plunge in the prices of oil was sending economic and political shockwaves around the world.

Andrew, who is also the Manging Director, Beacon Energy, said that oil exporting countries were bracing for potentially crippling budget shortfalls, while importing nations are benefiting from the lowest price in four years.

He said that the global price of oil was near 83 dollars (N13,695) per barrel, down about 32 dollars (N5,280), or 28 per cent, from its high point for the year.

Oil consumption globally is 91 million barrels per day.

“That means the world’s oil producing countries and companies are bringing in as much as 2.8 billion dollars (N462 trillion) less in revenue every day, and consumers, shippers and airlines are saving comparable amount on gasoline, diesel and jet fuel.

“The global price of oil was relatively stable for nearly four years, averaging 110 dollars (N18,150) per barrel.

“Increased production in the US, Canada, Iraq and elsewhere made up for declining supplies in nations such as Iran and Libya, and helped meet rising global demand,’’ he said.

NAN reports that the situation was said to be worsened by the nation’s dwindling oil output which is estimated at about 2.5 million bpd, including condensates.

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