Jack & Jill Politics

While Ms. Hillary is out threatening to obliterate Iran, Obama is out trying to bring peace to Nigeria. Absolutely unbelievable.

Even if the deal doesn’t hold, it’s just amazing that a US presidential candidate, in the midst of a three-on-one political battle (vs. McCain, Clinton and the Media) somehow finds time to appeal for a ceasefire in the volatile Niger Delta.

From ThisDay’s report in Port Harcourt, Nigeria

The Movement for the Emancipation of the Niger Delta (MEND) has said it is considering a temporary cessation of hostilities in the oil-producing region based on an appeal by United States presidential hopeful, Senator Barack Obama.

MEND also said in an e-mail that its ceasefire was to enable the federal government to have a rethink over the way it has handled the matter concerning its leader, Mr. Henry Okah.

The spate of attacks in the last two weeks has led to more volatility in the crude oil market with substantial production cuts in Nigeria.

And this isn’t the first time. Back in January, JANUARY, he was on the horn to Kenya trying to help calm the violence in the wake of contested elections there.

Of course the story of Obama’s action in this case contrasted with Hillary’s bluster is a fun political story in the context of this increasingly-absurd campaign, and you can find the same Reuters story cut and paste across a variety of news sites like Politico.

But I want to go a step further and try to be the media I want to see. What is MEND? Why is there so much violence in the Niger delta? And why should we care?

There’s an excellent primer on the situation over at The Oil Drum, a site devoted to discussing resource depletion in general and peak oil in particular. In March of 2007, Jeff Vail wrote a piece titled “Nigeria: Energy Infrastructure Firestorm“

The situation:

The violence in Nigeria’s delta region has become a firestorm, and the consequences of this transformation will fundamentally impact that nation’s ability to export oil. Recent events in the delta region have transitioned the violence there from a negative-feedback loop where there was a disincentive to militants to shut in too high a portion of Nigeria’s oil exports to a positive-feedback loop where militants will compete to completely destroy Nigeria’s capacity to export oil.

On the history of tensions

Nigeria is a construct of post-colonial cartography. It is one of history’s foremost examples of the fiction of the Nation-State, a forced amalgamation of over 250 distinct ethnic groups and numerous religions (see illustration) to effect efficient British control of the region. In the post-colonial era, three dominant ethnic groups, the Hausa-Fulani, Igbo, and Yoruba, continue to joust for control of Nigeria’s huge oil revenues—and for control of Nigeria itself, though this is truly and ancillary concern to the oil.

One thing has remained constant: the ethnic Ijaw, who inconveniently live where all the oil is, have been almost entirely excluded from sharing in the oil riches in their own backyard. As a result, the Ijaw resorted to violence to advance their political aims of representation in Nigeria’s government and a real share in the oil revenues. MEND, the Movement for the Emancipation of the Niger Delta, was the military branch of the Ijaw struggle.

What followed was a fracturing of MEND and a transition from politics as the primary motive of guerilla activity to profit. Various MEND factions kidnapped oil employees for ransom and found doing so increasingly profitable. The region moved from a world in which reducing oil exports went from undesirable to highly profitable.

More from Vail on the ramifications of all this.

First

The new entrepreneurial violence is comprised of multiple actors, each competing to extort money from a limited target list of oil installations, foreign workers, and foreign oil companies. Because the actors are now militant youths seeking short-term financial gain, rather than careful elders seeking long-term political concessions, there is a strong market incentive to fill the available market space—in other words, to escalate kidnappings and infrastructure attacks until all Nigerian production is shut in.

and second

…this transition from ideologically motivated violence to financially motivated violence portends problems for energy infrastructure throughout the world. As peak oil exacerbates already tight global energy markets, record energy prices will allow energy firms everywhere to accept the kind of ransoms and payoffs that are fuelling the escalation of violence in Nigeria’s delta region.

There is good reason to believe that today’s sectarian or ideologically driven violence in Iraq and elsewhere may transition to financially motivated attacks on energy infrastructure. This transition will be accompanied by the same critical change observed in Nigeria: there will no longer be the motivation to keep the majority of production on-line, or to prevent long-term damage to production capacity. Instead, as long as marginal returns on investments in energy infrastructure attacks remain positive, there will be a strong incentive to escalate these attacks no matter how completely a region’s export capacity is destroyed

That’s right. There’s more to come, and all this further restricts global oil supply in an era of booming demand and the reduced production from major producers like Mexico and even Saudi Arabia.

Since Vail wrote his piece, Nigerian production has continued it’s downward spiral.

Production has dropped below 2 million barrels per day for the first time since 2003. And what happens when you restrict supply of a scarce resource? Prices climb.

I’ll post more in the future about what we can do in this situation, but one thing is for sure. The gas tax holiday is dumb, stupid and worthless crap. Don’t believe me. Listen to over 200 economists dis McClinton’s pander.