This story may not impact the price of oil in the near term but some day it may bite.  It’s a useful construct for understanding what is happening in the geo-politics of oil, which is vital since above-ground conditions increasingly determine how much oil reaches OECD markets.

Here is the short version:

   1. A great deal of future potential oil flows lie offshore Africa.

   2. Shipments of oil from Nigeria are attracting pirates.  Bandits who are internal to Nigeria are also stealing much oil.  It is likely that African oil in general will increasingly be subject to criminal theft.  Some will be sold back to Africans at far less than global prices (since the cost to the pirates is very low), so criminality will tend to reduce the amount of produced oil that goes into the global markets from Africa.

    3. China is sending large numbers of people to Africa for two purpose: to provide jobs for peasants and to establish direct oil supply lines from new African fields to China, thus by-passing world markets.  This is consistent with Chinese policies in the Middle East, Sudan, and Venezuela, for example, to sign direct supply agreement for oil to be shipped to China.  This policy tends to restrict the supply of oil in the free market and therefore raise prices.    

There seems to be a vicious cycle developing here that will tend to exacerbate these trends.   Oil wealth, as many have noted, tends to increase dictatorial governance, vis. Sudan, Kazakhstan, many other oil rich and dictator-controlled countries.  Bad governance tends to increase piracy, as the piece quoted below points out in regard to Somalia.  Piracy and bad governance increase the ability of China, with its loose political moral standard, to infiltrate and gain influence.  China has no interest in helping local populations, so both Chinese influence and dictatorial government  tend to impoverish the local populations and thus to increase both crime and bad governance. 

I think that one of the great trends of the next decade will be the increasing link between oil wealth and crime in less developed countries.   It will not be a trend that  bodes well for increased oil production.  Nor for progress in fighting disease, hunger, and bad governance is the poorest countries.

Here are excerpts from the referenced reports:    

The curse of oil on African nations

The boom won’t help the continent’s poor, writes David Blair.

IN THE coming decades Africa’s oilfields may begin to rival the strategic significance of the Middle East’s reserves. As discoveries elsewhere steadily diminish, the global balance of oil wealth shifts towards Africa with every passing year.

Already, the US buys more oil from Angola and Nigeria than it does from Saudi Arabia.  Angola, the newest member of Organisation of Petroleum Exporting Countries (OPEC), has overtaken Nigeria to become Africa’s biggest producer, turning out almost 2 million barrels a day. In the next three years Angola will probably raise its daily output to match Kuwait’s 2.6 million barrels.

By 2015 the US will buy one quarter of all its oil from Africa, compared with about 15 per cent from Saudi Arabia, and the continent will become the superpower’s largest single supplier, with the sole exception of Canada. Two reasons lie behind this crucial change in the global pattern of oil production.

U.S. targets Somali pirates

By Donna Leinwand, USA TODAY

The U.S. and international military forces are taking more aggressive action off the African coast as bolder and more violent pirates imperil oil shipments and other trade.

The area is a key shipping route for cargo transported to and from the U.S. and elsewhere. In response to pirate attacks, the U.S. has stepped up its patrols to deter them and sometimes intervened to rescue hostages and ships. It also has increased its intelligence-sharing in the area, says Navy Lt. Nate Christensen, a spokesman for the 5th Fleet in Bahrain, which patrols Middle Eastern and African waters.

The U.S. is “very concerned about the increasing number of acts of piracy and armed robbery” off the Somali coast, he says. Somalia’s weak government has admitted it can’t control its territorial waters, and Nigeria is fending off a rebel group.

How China’s taking over Africa, and why the West should be VERY worried

Last updated at 17:16pm on 18.07.08

In the greatest movement of people the world has ever seen, China is secretly working to turn the entire continent into a new colony.

Reminiscent of the West’s imperial push in the 18th and 19th centuries - but on a much more dramatic, determined scale - China’s rulers believe Africa can become a ’satellite’ state, solving its own problems of over-population and shortage of natural resources at a stroke.

With little fanfare, a staggering 750,000 Chinese have settled in Africa over the past decade. More are on the way.

The strategy has been carefully devised by officials in Beijing, where one expert has estimated that China will eventually need to send 300 million people to Africa to solve the problems of over-population and pollution.

Tags: peak oil energy investments

This entry was posted on Tuesday, July 22nd, 2008 at 9:44 pm and is filed under China, India and the Pacific Rim, Nigeria, Poverty and Oil (demand destruction), Predictions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.