Tag: Nigeria

Oil Price Blues (Read: Dangers) for Some

As the price of crude oil continues its downward tumble towards $80 per barrel, I am reminded of a similar scenario from near the end of the Cold War in the 1980s. When Saudi Arabia announced in 1985 that protecting oil prices was no longer its main priority, oil production surged and prices fell off a cliff, briefly plunging below $10 per barrel, as I had correctly predicted.

Lower prices delivered a fatal blow to the Soviet economy, which ended up seeing $20 billion per year in oil revenues evaporate. The resulting fiscal shortfalls proved to be a dagger in the heart of the U.S.S.R.

On October 1st of this year, Saudi Arabia’s national oil company announced that it had abandoned a policy of price protection and would start to focus on protecting its market share. Combined with falling global demand and rising supplies elsewhere, oil prices have fallen accordingly. This has put a squeeze on eight of the world’s top oil producers. States like Iran, Venezuela, and Iraq can only balance their current budgets at oil prices ranging from $110 to $135 per barrel (so-called break-even prices).

If oil prices stay below $90 per barrel for any length of time, we will witness massive fiscal squeezes and regime changes in one or more of the following countries: Iran, Bahrain, Ecuador, Venezuela, Algeria, Nigeria, Iraq, or Libya. It will be a movie we have seen before.

Falling Oil Prices Put Producers Between a Rock and a Hard Place

Over the last few months, the price of Brent crude oil lost over 20% of its value, dropping below $90 just yesterday and hitting its lowest level in over two years. In consequence, oil producers will no longer be able to rely on oil revenues to pay their bills. The fiscal break-even price – a metric that determines the price per barrel of oil required for a nation to balance its budget at current levels of production – puts the problem into perspective.

Using data from Bloomberg and Deutsche Bank, I prepared a chart showing the break-even prices for the world’s major oil producers and the price on Brent crude. Over the past six months, Brent crude fell far below the break-even price for eleven of the top oil producers in the world; Iran, Venezuela, Nigeria, and even Saudi Arabia can no longer finance their governments’ largess through oil revenues.

The combination of oil markets flying into a perfect storm and excessive government spending puts most of the world’s oil producers between a rock and a hard place, where they will stay for some time.

Strip-Search Machines on the International Scene

This week, Secretary of Homeland Security Janet Napolitano is pressing countries around the world to use “strip-search machines,” low-power x-ray and radio wave scanning devices that reveal what is underneath travelers’ clothes. The machines provide a small margin of security at a high risk to privacy.

And those privacy risks are manifesting themselves overseas. On AllAfrica.com, news service This Day reports on how strip-search machines have been used to peep at travelers as nudes in Lagos, Nigeria:

[D]uring off-peak periods, the aviation security officials, who are trained on the use of the scanners, usually stroll from the cubicle located in a hidden corner on the right side of the screening area where the 3D full-body scanner monitors are located. They do so to catch a glimpse of some of the passengers entering the machine and immediately go back to view the naked images, in order to match the faces with the images since the faces are blurred on the monitors while passengers are inside the machine.

The report notes that one of the “conventional scanners”—a magnetometer, most likely—was put out of service to corral people into the strip-search machine.

Italy has abandoned strip-search machines after a six-month test, due both to privacy issues and “because they are slow.” This is the sleeper issue that may soon wake as more machines show up in our airports: Strip-search machines take a very long time compared to magnetometers.

There are more than half a billion enplanements in the United States each year. If each traveler is delayed by 10 seconds, strip-search machines would waste nearly 1.4 million hours of Americans’ time directly—much more if you include the schedule-padding that all fliers would have to practice to avert strip-search machine delays.

The margin of security provided by these machines is small. In an interview on Fox’s local affiliate in D.C. last night, I said, “If we go down the strip-search machine route, there’s going to be more methods of concealment, and we certainly don’t want the TSA looking there.”

Hopefully, my poor grammar distracts you from the full import of that line.