Vote may affect gas prices

Nigeria 2007

By Rebecca Roberts

June 10, 2009

Appeared in Lincoln Journal Star

Violence and corruption in Nigeria’s presidential elections could pose a very real threat to local pocketbooks — in the form of higher gas prices.

With so much focus on oil in the Middle East, many Americans don’t realize the west African nation supplies from 8 percent to 10 percent of U.S. oil imports. Africa’s leading oil-producing state is among the top five suppliers to the United States. At about 1,100 barrels a day, the United States imports twice as much oil from Nigeria as from Iraq.

“I think that people don’t realize what a global economy we live in,” said Jeff Lenard of the National Association of Convenience Stores, representing more than 100,000 gas retailers across the United States.

But political violence in the country’s oil region has prompted Nigeria to reduce crude production. And in a world market, a cutback anywhere affects prices everywhere.

“It certainly isn’t a good sign,” Lenard said. “There isn’t much leeway right now between what’s being produced on the world market and current demand.”

Mark Whitehead, president of Whitehead Oil in Lincoln, agreed.

“Our industry is worried about anything that is going to restrict supply,” said Whitehead, who supplies or operates several dozen stations in Southeast Nebraska, mostly in Lincoln.

Militants in the oil-rich Niger delta kidnap foreign oil workers weekly, aiming to call attention to the country’s failure to share its profits with its people. They also practice “bunkering” — tapping into oil pipelines, both to sabotage production and to sell what they siphon on the black market.

In response, oil companies working in Nigeria this year cut output by 10 percent. That came on the heels of a 20 percent reduction last year. Some fear a complete shutdown of oil production if voter outrage predominates after the April 22 elections.

“I don’t think anyone could accurately predict where prices would go” in the event of a shutdown, Lenard said. “The effect would be substantial.”

And, he added, just the threat of a shutdown could have an effect.

“It doesn’t take an actual event to drive up prices,” he said. “All it takes is the fear of an event.”

If Nigeria’s volatile political situation did bump up oil prices, Whitehead said, gas prices would rise in tandem — and drivers would respond with their wallets.

“Economics 101 will tell you that the higher the price of the product, the less the demand,” he said. “That theory holds true with gasoline as well.”

But, Lenard said, any such uptick would be temporary, and the global market would even itself out. He doesn’t see Nigeria’s political situation as having a long-term effect on gas prices.

“It hasn’t happened, and we don’t predict it will.”