With the disruptions in the oil and gas supply caused by the Russia ruthless invasion of Ukraine and the subsequent sanctions on Russia, the effect is starting to reverberate all over with the spike in the cost of gasoline.
With gasoline prices now topping $4 per gallon on average in the US and elsewhere in the world, there are calls and plans by the US president Joe Biden to persuade the Oil Producing Countries, comprising basically of Saudi Arabia and United Arab Emirate to increase their production capacity.
As long as global prices stay high, however, U.S. prices will, too, and Russia’s aggression will cause pain for oil consumers virtually everywhere.
The price of oil hit an all- time high of$135 a barrel, the highest in 14 years. And with prices likely to rise further in the short term, perhaps toward $150 a barrel, countries dependent on oil importation are beginning to look for alternative supply chains.
No country, no matter how wealthy and independent it is can shut itself off from the global oil market and enjoy cheaper prices purely because of bounteous domestic supplies. Except of course, Saudi Arabia, but when a shock threatens supply anywhere it pretty much raises prices everywhere. That’s why the disruption of oil supplies from Russia, the world’s third-largest producer, has sent jitters down many spines with U.S. oil prices close to $120 per barrel and gas prices above $4 per gallon; even though the United States imports very little Russian oil. Virtually every oil producer is selling into the same market, at whatever price global supply and demand determines.
Though the US is a net importer of raw crude, the net imports are getting a lot smaller than they used to be because of the surge in US production. As a result they have come to heavily rely on Canada, Mexico and the Middle East and some other places to meet their demand for gasoline and other finished products.
It is a fact that while the US is a net importer of raw crude, it also remains a net exporter of refined oil. And with most U.S. oil coming from five states—Texas, North Dakota, New Mexico, Oklahoma and Alaska—producers want to sell it where costs are lowest.
Energy markets are as complex as they come. In the United States, at least, where the markets are private sector driven rather than government controlled, oil producing states and companies can unilaterally decide where, when, to whom and at what price to sell their products with little or no government intervention.. The American president can’t control oil output the way Russian President Vladimir Putin or the Saudi ruling family can. Producers decide how much oil to drill, and whom to sell it to, based on the profit motive. Since 2015, when President Obama changed the rules to allow the export of U.S. crude, American drillers can sell oil wherever in the world they can legally get the best price.
Being that the oil producers in the US are there for the profit, it is a given that with the global price for oil increasing the price of oil and gasoline in the US will equally spike. The Russian aggression in Ukraine has only worsened the situation as no amount of domestic production of oil in the US can be enough to go round. Hence, the US serious consideration on alternative sources of oil to meet with the demands at home, and still carry on with their exports unhindered.
US, for now, cannot be considered as energy independent, despite the robust development of renewable energy sources such as wind and solar. This is because renewable energy cannot be stored, transported or sold in far off markets, in the way and manner oil and natural gas can be.
But while other well advanced countries are making contingent plans to avoid serious disruptions in the supply and production of oil and natural gas, Nigeria appear to be resting on its oars.
As a member of OPEC, the country is heavily dependent on oil revenue for close to 90 per cent of everything. Unfortunately, even as this is the case, the country sells only the raw crude at a cheaper price which it imports at a much more expensive price from other more developed countries of the world with the capacity to refine; having not fully developed their refineries to undertake this essential task. So, even with the spike in the world price of oil, Nigeria may not be able to cash in on this unexpected windfall caused by the crisis in Ukraine. Nigeria, therefore, may remain unaffected by it all.