Kotok called Nigeria “the most important oil producer in the world” and said that if unrest there gets really out of hand – which he warned is a very real possibility that everyone is ignoring – oil could soar to $150 per barrel and crush the global economy.
A big deal for oil and the global economy
In a client briefing today, Roubini Global Economics explains why Nigeria is becoming such a problem for the global economy. World oil supply is seriously tight right now when you factor in the supply outages caused by sanctions on Iran and unrest in Libya.
Many analysts hoped that Nigeria could help fill the gap. However, RGE points out that Nigeria is currently producing around 2.4 million barrels of oil a day, which is about the same as they were producing ten years ago and is way below the government’s target of 4 million barrels per day.
Now, on-the-ground reports in Nigeria are revealing another troubling sign – long lines forming at gas stations in Nigeria’s most populous city of Lagos as retailers run out of gas:
The current fuel scarcity on Monday unduly influenced the price of the product in Lagos forcing motorists out of desperation to buy from the black market for as much as N200 per litre. The official price is N97 per litre.
BusinessDay checks revealed that more filling stations have joined the growing numbers of stations without the product. Findings along the long stretch Lagos-Badagry express road showed that a number of filling stations along the road did not sell yesterday, as they claimed non-availability of the product when our correspondent visited.
And that’s only more fuel for the fire. Yet no one seems to be taking notice, like Kotok said.
Hamza Khan, an oil analyst for the Schork Group, told Business Insider that Kotok has a fair point. The reason no one is paying attention, according to Khan:
We can’t pay attention to terrorist attacks in Nigeria because they happen so frequently. We’ve got MEND…they’ve been carrying out attacks on the oil sector in Nigeria for the last four or five years at least. So, this is a region that always has a certain level of turmoil, but whether it reaches a breaking point or not, it’s still up in the air. I don’t think we can pay attention to it until we see something more concrete and more tangible.
Veteran oil trader and noted author Dan Dicker told Business Insider that he’s skeptical that it’s so much worse now in Nigeria than it’s been before. However, he said that if a full shutdown were to happen in Nigeria’s oil industry, “that’s probably good for [another] $20 in the Brent contract.”
Despite all of the explosive developments in Nigeria as of late, it seems like at the moment, the situation is sufficiently under the market’s radar. If Kotok’s fears materialize, all of that could change in an instant.