The annual World Energy Output report just released by the International Energy Agency (an autonomous international organisation comprising 28 members from developed countries whose main work is to ensure reliable, affordable and clean energy) says there will be a major shift in global energy demand from North America and Europe to China, India and South-East Asia. The latter account for nearly half the population of the world and are the fastest-growing and largest economies in the world. “The foundation of energy system is changing,” Dr Faith Baird, the chief economic advisor, is quoted as saying. The report further states that the United States will become the largest producer of crude oil by 2015 due to its exploitation of shale rock; it will therefore become self-sufficient. Other countries are aggressively opening up new oil fields and are looking for alternative energy sources.
This scenario gives the impression that crude oil price will tumble. But this is not likely to happen soon, though there may be a shortfall in supply due to the huge demand of energy in Asia. Most likely, the price of crude oil will remain unchanged except for major fluctuations occasioned by world political upheavals. However, the role of the Organisation of Petroleum Exporting Countries, OPEC, is certain to diminish.
However, the prognosis is not favourable to Nigeria, a country that depends mostly on the exportation of crude oil for its foreign exchange earnings. Within the next two years, the United States, which is the leading importer of Nigerian oil, may no longer need it. In the long run, as global energy demand increases, many countries will explore new avenues of production and alternative energy sources. This will eventually drive the price of oil down. Besides, the climate of political uncertainty that has shrouded Nigeria in the last five years is not abating. Indeed, the future looks bleak.
The federal government should, as a matter of great national urgency, take drastic action and plan ahead. Putting oil price benchmark for the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) at between $76.5 (which the executive is proposing) and $79 (which the legislators are demanding) is a travesty, since we know that the price of crude oil has been stable in recent years, hovering over $100 per barrel.