[size=14pt]Nigeria Cuts Benchmark Oil Price To $45 In `09

Published: October 20, 2008 13:37h
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http://www.javno.com/en/economy/clanak.php?id=194256


Nigeria has cut the proposed benchmark oil price in its draft 2009 budget to $45 per barrel from $62.5 as a result of the decline in world crude prices, a senior finance ministry official told Reuters on Monday.

"Forty-five dollars is what we are working with right now, but it has to go to the National Assembly (for approval)," the official said, declining to be named.

The 2009 budget in Africa's most populous nation had been expected to go before parliament earlier this month, but a sharp drop in oil prices over the past three months has played havoc with the key assumptions on which the spending plans are based.

Next year's budget had been based on projected oil production of 2.3 million barrels per day (bpd) at a benchmark price of $62.5, compared with $59 in the 2008 budget.

But fears of global recession have depressed oil demand in the United States and other industrial nations, driving world prices down by more than 50 percent from their peak above $147 a barrel just three months ago.

U.S. crude for November delivery was trading at $73.80 on Monday.

Nigeria saves any oil revenue above the benchmark oil price into an excess crude account, a pillar of IMF-backed reforms meant to guard against price volatility on world markets and help it to save money.

trickle down economics of deep zone and Sarah Palin

Thank God gas is approaching $1.60 in my neigbourhood
I can at least heat my home without crying

I am waiting to see the expression on your face when your relations at home shed blood from poverty associated with this oil prices. It's only the northerners that should be rejoicing because they are the least dependent on oil and the good life associated with it apart from their leaders. They can easily switch back to nomadic life style among their herds but what will Yorubas and Igbos that love driving maybachs, BMW's and Hummers do?

BMW's Hummers and Maybachs? Those are mostly criminal agents stealing government/Nigerian people's money.

Ordinary people benefit little from whether govt resources go up or not, there has been little tangible effect on the ground of the bumper oil prices till date - A drop is not necessarily a bad thing. It will cause the country to seek diversification of it's income base.

Below $50 a barrel is not good enough, even for US consumers - in the long run, such a low price will discourage investments in new oil fields and necessary infrastructure, leading inevitably to another shortage of supply and increased prices once again.

The best price for all concerned would be in the $60-$80 range - the volatility is a false relief which will disappear in a few months - low now, it may skyrocket if the winter suddenly becomes cold.

Nigeria will not necessarily suffer in terms of a short term oil price drop - we have sufficient reserves to meet expenditure needs to make up any short fall in revenue for 1-2 years. If it is a prolonged low price regime (highly unlikely) occurs, then we might have a problem.

The whole idea of a reserve is to even out economic activity and prevent the see-sawing in our expenditure levels in general.

$45 is still a good price for Nigeria, oil is still relatively low cost here compared to other locations in the world.

debosky:

Below $50 a barrel is not good enough, even for US consumers - in the long run, such a low price will discourage investments in new oil fields and necessary infrastructure, leading inevitably to another shortage of supply and increased prices once again.

The best price for all concerned would be in the $60-$80 range - the volatility is a false relief which will disappear in a few months - low now, it may skyrocket if the winter suddenly becomes cold.

I don't see how the $60-$80 range is good enough for net oil importers. It was only since early 2007 that oil prices became firmly lodged in that range, even just prior to that, oil consumers ,especially developing nations, were struggling to cope. 

I think in the present economic climate, $25 to $30 is ideal for both consumers and exporters. That was the range prices were in as recently as 4 years ago, don't tell me oil exporters were struggling then. They loved it and OPEC once announced its ideal price target as $22.

$25-$30 is low enough to enable consumers cope but high enough for OPEC nations who were enjoying economic growth at that range. Higher oil prices bring forward the end of the oil age and have a disruptive effect on the economies of both producers and consumers.

What good was it when the Oil Price per Barrel was at an all time high?It only meant there was more money in circulation for the people in power to embezzle  frankly i couldn't care less if it was sold for a Free.99

DeepZone I am quite amazed at your rational (Trickle down economics) - do you seriously believe in that garbage as a Nigerian? If you are one of those people benefiting from government contracts, please just say so; this way we'll know where you are coming from. Nothing trickles down in Nigeria, except abject poverty - 5th or 6th largest oil producing country in the world, with nothing to show for it. Just look at our communities, infrastructure, schools, etc, it is quite shameful! None of this compares to other oil producing countries, not even Venezuela, I might add. Most of our officials today are in the office for one reason only - get rich! They don't love this great country of ours, and are hardly patriotic. If you love something you take good care of it, not loot and run it down.

4 Play:

I don't see how the $60-$80 range is good enough for net oil importers. It was only since early 2007 that oil prices became firmly lodged in that range, even just prior to that, oil consumers ,especially developing nations, were struggling to cope. 

I think in the present economic climate, $25 to $30 is ideal for both consumers and exporters. That was the range prices were in as recently as 4 years ago, don't tell me oil exporters were struggling then. They loved it and OPEC once announced its ideal price target as $22.

$25-$30 is low enough to enable consumers cope but high enough for OPEC nations who were enjoying economic growth at that range. Higher oil prices bring forward the end of the oil age and have a disruptive effect on the economies of both producers and consumers.

You miss my point - I am not talking about oil exporters such as Saudi Arabia and co with easy to produce already verified oil deposits. I am speaking about the IOC's who need to develop and increase capacity through developing new reserves and these will inevitably not be cost effective or profitable at a 25-30 range.

Granted that the run up to $100+ oil is not sustainable, but that was fed by certain factors. The reason oil exporting nations such as OPEC were happy with $22 was due to the oil glut in 1999 when oil went down to $9 - so double that price was feasible for them, but the direct consequence of oil remaining at $22-$30 for so long was that insufficient extra supply was coming on from other sources, leading to the sharp run up in prices recently.

The fact is, new reserves such as Petrobras' Tupi field, and other major deep offshore fields cannot be developed in a sub $50 price range, neither can oil sands - If the west wants to get these resources, oil below $50 will negate those efforts and dry up investment. Many of such projects in Canadian Oil Sands and deep offshore are not feasible below a 50-60 range.

There is currently very little spare capacity in the world oil production such that a major shock such as a terrorist attack on Saudi Arabia or a major failure or Hurricane is likely to cause another significant price spike. The era of cheap oil is over - apart from a few places such as the middle east, extracting oil and gas is now more expensive than it has ever been, with harder and more challenging reserves needing to be exploited.

i have to agree with debosky on this one. you might want to lend your expertise to uganda which is asking for help exploring it's oil reserves

1. as A-40 hinted earlier ,when the oil prices hit the roof ,how many ordinary nigerians did it ever rub off on

2. if at this point, the nigerian government hasn't composed itself enough to drift from a purely oil based economy, then too freakin bad. .

st-kris:

1. as A-40 hinted earlier ,when the oil prices hit the roof ,how many ordinary nigerians did it ever rub off on

2. if at this point, the nigerian government hasn't composed itself enough to drift from a purely oil based economy, then too freakin bad. .

Its so sad the economy cannot possibly go worse than it already has because when the international prices of oil went up our own fuel pump prices followed suit what should have worked at our advantage seems to be working against us
Petrol is 70 bucks Diesel is around 100 bucks what better way do we measure how bleeped up our economy is despite the fact that we are a key OPEC member

This is a typical case of a chicken coming home to roost.

When crude sold for $145/barrel. It was the folks living in the West that bore the brunt. I can't forget the anguish thats lits up my face when i get to the pump buying gas for $4/gallon . Now, I hope the chop-i-chop folks in Abuja saved for rainy days? Otherwise. . . .

Funny enough Chavez and Ahmadinejad said the days of "free oil" at $22 /barrell is over. Well, with the daily sliding price of crude, the OPEC cartel may still have to export it to the West free of charge .

In all fairness, crude at $45/barrel is unfair to both consumers & producers. Maybe OPEC should slash production by another million barrel to halt the decline and prolly stabilize it. As Winter beckons, the demand for oil is gonna come up again and all of us buying Gas at a buck 64cent/per gallon as i did today would all see that the honeymoon would soon be over!

Nigeria, Iran and Angola are the countries i feel for most. Yeye countries who have failed to diversify their economy hence relying on Oil for more than 80% of their external income/revenues. So as the windfall ends, na so so cry their government dey cry. Ahmadinejad on his own can't even wait for the next OPEC meeting before telling his oil minister to propose a whooping 2 million barrel cut in production .

Meanwhile, Imma smile to the pump tommorrow and fill up my shyte cos my unfailing sixth sense is telling me that the Zionists are gonna strike Nantaz and other Iranian nuclear facilities in the next couple of days and this is sending crude prices to $200/barrel. Y'all think am lying? Watch this space

obviously, OPEC is going to do something & I don't see the price dropping to as low as $22 per barrel. It's really not as bad as we are beginning to paint it. Anyway, let's watch & see. Dubai foresaw this a long time ago & took appropriate steps towards diversification. Oil go finish for Nigeria one day o!

Anyway, gas dey! No Shaking!!!

Abeg let it drop to 2 per gallon may be naija will be forced to find another way to make money. good news to me

deepzone

pls hush nonsense. Its that oil that has kept the east subjugated so yes yes nigeria needs not make anymore profit especially when just a few benefit from it.

Peg the oil @$70 per barrell and 4play is asking for lower price. It's a pity that our infrastructures and industries are in still coma yet the only source of revenue that will enable creditors lend us more money is going down the drain and some Nigerians are here rejoicing and laughing with their treacherous mouth. What are we going to do if the oil money is no more?. We are not yet prepared to market technology, businesses are not strong yet etc and we need at least more ten years to put our acts together. Jinxing Nigeria is the worst thing you can do now and it's a pity the abuses are coming from educated run away citizens like 4play,Grafikdon and Debosky who live as aliens in their adopted nations. I can bet you guys that their university education in Nigeria was subsidized with the same oil money they don't want anymore meaning that the younger generation of Nigerians yet to obtain university training will not be able to reap the benefits they enjoyed during their college days in Nigeria because oil should be pegged at $25/barrel. Selfishness if you ask me.

cmatrix:

DeepZone I am quite amazed at your rational (Trickle down economics) - do you seriously believe in that garbage as a Nigerian? If you are one of those people benefiting from government contracts, please just say so; this way we'll know where you are coming from. Nothing trickles down in Nigeria, except abject poverty - 5th or 6th largest oil producing country in the world, with nothing to show for it. Just look at our communities, infrastructure, schools, etc, it is quite shameful! None of this compares to other oil producing countries, not even Venezuela, I might add. Most of our officials today are in the office for one reason only - get rich! They don't love this great country of ours, and are hardly patriotic. If you love something you take good care of it, not loot and run it down.

Every single Nigerian has benefited one way or the other from our oil money. I believe in true capitalism and not your obama style socialism that will soon freeze hell over. It's true that majority of our oil revenue entered wrong pockets but there was more accountability under Obasanjo . Today, Nigerian economy is not only booming but the safest in the world, thanks to baba Sege. If you don't believe that wealth trickles down, then I cannot help you because you are either a communist or a an eskimo.

Absulotely rubbish.When the oil price was at its peak; times two of the actual price wht effect has it on Nigerian economy.Now is falling even the lay man on the street will now understand the effect of oil price on Nigeria economy.They have got enough reasons to justify their poor economic policies.Wht happens if the oil finally dries out, coz it will soon happen. i have been sounding this that Nigerian govt. should explore other major sources for revenue instead of capitalising their budget on jst oil as if that is the only natural resouces we have there in Nigeria.
The excess we made during that period of high increase in oil price where are they?That has been my question,coz as am concern Nigerian as a whole has nothing to show for it yet only few individual on power could boost of it.
Those who said all Nigerian benefited from it should come out and tell how pls.At least i need more enlightenment on that aspect.

Oil prices coming down is a good thing looking @ it from consumer's point of view. But looking @ the other end it might lead to deep and troubling political, economic and environmental consequences
Cheap oil will probably bankrupt the small oil producers and oil equipment companies (I know we had be talking about an alarming cheap rate somewhere in the region of $20 - $30 per barrel)
Cheap oil will further increased the dependence of the West, on foreign oil imports, resulting in larger trade deficits. Do you know that several studies have indicated that there is a negative correlation between the fluctuations in the oil price and the gross national product of Western countries. From 1982 to 1986, when oil prices were high, the economies of the US, Japan and Western Europe were expanding, whereas the second half of '80s, when prices collapsed, it was marked by recession.

Development of oil reserves is tied to the global economy. Oil-producing countries must maintain a high level of revenue from oil sales if they are to continue developing their infrastructures and industrial basis, and at the same time invest in their oil industries to maintain and develop their resources to meet worldwide demand. All of this means more jobs in the West, since the oil producers rely on the West for the necessary technology.
Finally, consider the environmental effects of cheap oil. The main culprit of air pollution is fossil fuels, mainly oil, which in the US. accounts for 85% of fuel use. There are hidden costs of cheap oil, which we pay for through air and water pollution, global warming and acid rain.
Cheap oil induces people to overuse it and thus discourages development of alternative sources of energy that are environmentally friendly. It affects the economy negatively. It costs us huge sums in health care. It causes social and political instability abroad.

When it was high, was it an advantage? did you see any changes? nothing like that.

@poster

From economic point of view that mighty make a little or no difference, since that is not the only parameter for measuring the viability of a nation's economy.

@Topic,
Another punch in the stomach for the stock market.Its going to take a while yet for the good old days to come back.I think.

OBVIOUS:

This is bogus news!!!!

Doesn't make sense to any good economist.

How can oil affect Nigeria's economy when most of the profits earned, only goes to the pockets of specific individuals who move the money overseas!!!

Such resources have never really affected Nigeria's economy. STOP WESTERN UNIONs/ MONEY GRAMS and see what will happen to the economy ?   _(psseeew)  

Well said. How does it affect me. I still buy my fuel for my generator despite the fact that we had a great oil windfall that we could have used to rectify our power crises. The money were spent in inflated contracts, remember house renovation saga in NA. Few individuals will carry the money and put in their accounts abroad. Prolonged hiss[size=8pt][/size]

@deepzone.i wonder where you got information about obj's accountability.As for me,i will forever stand for the truth that Abacha remains the most economically and infrastructurally successful president we ever had.oil prices hovered between $11 and $9 dollars during his regime and yet he had the ptf,left the naira stable,stopped 419 and left foreign reserve of up to 8 billion dollars.compare with obasanjos and give your frank result.

That is the best thing that can happen to Naija. Let the oil prices fall to rock bottom. It will force out the wild, wild politicians that want to be in power by all means. It will create the right atmosphere for those who have stuff upstairs to be allowed to stir the affairs of the nation. This nation is seething with resources. I guess the garden of eden must have been located in Nigeria. Nigeria has all it takes to be greater than America, but we have the wrong kind of pilots on the saddle. We don't need oil to make it great. Let oil be gone and Nigeria will bounce back. I believe!

In a way, i think Nigeria can benefit from this in the long run if things go our way. At least this will teach the leaders a lesson to learn not to make the oil industry our only source of income. If they think well (which i doubt) and I hope they do, diversifying the economy would be better for us and in the event that oil prices pick up again, it could be a win-win situation for us. God dey sha.

what's driving the price down, reduction in demand. Then the solution is simple, OPEC cuts production, price skyrockets, loba tan. For now we ll survive but it's high time we start diversifying.

DeepZone is a joker. Tricklle down economics has been proven to FAIL as witnessed by a world wide economic recession

You free market believers are disgusting. Even when hard cold reality shows your theories to be false you cling on to them like nothing else matters.

The Financial markets where the most unregulated markets of the last fifty years. Mortgage backed securities where sold and bought and prepackaged with zero regulation. The financial market of the last 15 years was a free marketers wet dream. And what happened after the unregulated market peaked and the participants made billions? THE GLOBAL ECONOMY WENT INTO FREEFALL. And during this freefall are you seeing money trickle down to you? Are you seeing inflation skyrocket and the common mans salary stay stagnant and its dollar value worth less and less while price of services and commodities skyrocket?

Can you honestly still say with a straight face free market and trickle down economics WORKS? Anyone who still says that after all that has happened is on crack.

People that steal money and spend it on awarded contracts just pass their money on to other rich people. PLEASE let us not pretent that billions stolen or acquired in the free market or in government corruption finds its way down, if that was the case Nigeria would be the place to make a living as its government officials are masters of money hoarding.

Obama believes in regulated Capitalism. If DeepZone believes true capitalism is unregulated then all i said above applies. If not then sorry but perhaps i misunderstood what he meant.

How the European nations now practice capitalism i.e. more socialist leaning is the way to go. Unregulated markets and unrestricted capitalism just doesnt work and the world has been shown a mega lesson in that failure with the global recession all of humanity is witnessing.

Abagworo:

@deepzone.i wonder where you got information about obj's accountability.As for me,i will forever stand for the truth that Abacha remains the most economically and infrastructurally successful president we ever had.oil prices hovered between $11 and $9 dollars during his regime and yet he had the ptf,left the naira stable,stopped 419 and left foreign reserve of up to 8 billion dollars.compare with obasanjos and give your frank result.

Abacha stopped 419? Are you kidding me?. How much did Obasanjo leave as foreign reserves compared to Abacha?. The only good think that tyrant called Abacha did was to clean our financial institutions a little bit but Obasanjo was the guy that brought the merger issue into play which solidified our financial institutions the more. Nigerians enjoy GSM today and the thousands of jobs that come with it is because of Obasanjo. Our external debt was balanced to 0000 before he left office. He also cleaned the oil industry and stopped bunkering and all the ish with it. What else can this man do for you?. The only thing he got back from Nigerians is criticism and Nigerians are so lame that they even criticized him when he lost his wife. What a bunch of pathetic people.

shango:

DeepZone is a joker. Tricklle down economics has been proven to FAIL as witnessed by a world wide economic recession

You free market believers are disgusting. Even when hard cold reality shows your theories to be false you cling on to them like nothing else matters.

The Financial markets where the most unregulated markets of the last fifty years. Mortgage backed securities where sold and bought and prepackaged with zero regulation. The financial market of the last 15 years was a free marketers wet dream. And what happened after the unregulated market peaked and the participants made billions? THE GLOBAL ECONOMY WENT INTO FREEFALL. And during this freefall are you seeing money trickle down to you? Are you seeing inflation skyrocket and the common mans salary stay stagnant and its dollar value worth less and less while price of services and commodities skyrocket?

Can you honestly still say with a straight face free market and trickle down economics WORKS? Anyone who still says that after all that has happened is on crack.

People that steal money and spend it on awarded contracts just pass their money on to other rich people. PLEASE let us not pretent that billions stolen or acquired in the free market or in government corruption finds its way down, if that was the case Nigeria would be the place to make a living as its government officials are masters of money hoarding.

Its only lazy mediocres that do not believe in free market. Wake up from the Obama slumber because that will never work. I bet ya.

donugapi:

In a way, i think Nigeria can benefit from this in the long run if things go our way. A[b]t least this will teach the leaders a lesson to learn not to make the oil industry our only source of income[/b]. If they think well (which i doubt) and I hope they do, diversifying the economy would be better for us and in the event that oil prices pick up again, it could be a win-win situation for us. God dey sha.

The leaders? What happened to your hands? can't you put your own effort and diversify our economy? Adenuga, Dangote, ekene dili chuku etc didn't wait for the govt to set the pace before they made their own mark. Your destiny is in your hands and not in the hands of yaradua.

so instead of countering my arguments you respond with an ad hominem. Nice work. How about responding to what I said. Oh wait, what I said is completely true and you have no answer for it. I am not surprised. The world economy as it stands today has proven your free market capitalism theories null and void. And I have always believed in regulated capitalism even before Obama was a senator or candidate for president or I even knew who he was. Tt has nothing to do with him. Read my previous posts years ago in these same fora.