Nigeria's Growing Insecurity Could Push Up Oil Prices Further, Analyst Says

By Stephen Mbogo | July 7, 2008 | 8:15 PM EDT

Nairobi, Kenya ( - An African-based investment analyst says further rises in global oil prices are likely, given the growing possibility of civil war in the world's sixth-largest oil producer, Nigeria.

Peter Wachira of the U.S. investment group AIG East Africa said instability in Nigeria had had an instantaneous impact on the price of crude oil, which passed the record $50 a barrel mark Tuesday. Price rises could continue if a solution to the political crisis in the West African nation is not found.

Wachira said oil prices would not drop even if Organization of Petroleum Exporting Countries (OPEC) agreed to raise output, as "there is already oversupply in the market."

Saudi Arabia has agreed to boost oil production in a bid to calm nervous markets.

In Nigeria, a rebel group known as the Niger Delta People's Volunteer Force has renewed threats to launch a nationwide war against the government, to win political and economic rights for the Ijaw tribe.

The Ijaw constitute 10 percent of the Nigeria's 137 million people, and live in the southern delta region - an area that accounts for nearly a half of Nigeria's exports of approximately 2.4 million barrels of oil per day.

The rebels have demanded that President Olusegun Obasanjo's government convene a national conference to discuss self-determination for the Ijaw and greater control of oil wealth by the region's inhabitants.

Rebel leader Moujahid Dokubo-Asari said all oil companies should cease operations on Friday, warning that all oil company employees would be legitimate targets. He advised foreign embassies to pull their nationals out of the oil-producing region.

The rebels would "target government infrastructure and oil company personnel," Dokubo-Asari said, but would not target oil facilities themselves since that would endanger the environment.

An armed riot by Ijaw tribesmen last year affected oil companies temporarily, resulting in a 40 percent reduction of output.

The government has termed the group "gangsters," accusing its members of involvement in illegally tapping pipelines and selling stolen oil to buy arms and fund criminal activities.

A defense spokesman said the military was in control of Nigeria's oil facilities and dismissed what he called an "empty threat" by the rebels.

The largest oil producer in the country, Shell, this week withdrew more than 200 non-essential staff, but the company said production had not been affected and pledged not to give into the threats.

Elsewhere in the country, Nigerians are unhappy about gas price hikes.

On Monday, the Nigerian Labor Congress warned of a national strike if the government did not reverse a recent fuel price increase, from about 33 US cents a liter to about 40 cents ($1.50 a U.S. gallon), within 14 days.

Analysts say oil prices are also being pushed up by uncertainty over the situation in Iraq, and a surge in oil consumption by the world's two most populous countries, China and India.

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