Business
Middle East Crises Pump Fuel Prices Upwards with Attacks on Iran, Saudi Arabia
The persistent war between the United States and Iran, and the recent attacks on Saudi Arabia’s oil infrastructure continue to mount pressure on the global crude oil market, pushing prices northwards.
While the hostilities have disrupted crude shipments, the attacks on Saudi Arabia’s oil infrastructure by Iran-backed Houthis have added a new vent to an already longsuffering global energy market.
With the escalation resulting in higher crude prices, Nigeria would see herself earning more from her crude exports, while the citizens would bear the brunt, as she imports refined products and sells at commercial rates, owing to the deregulation of the market.
Already, petrol prices have climbed to N1,500/litre in some parts of Nigeria, with Lagos being the cheapest at N1,395/litre.
Cries from businesses and households crescendoed this week when pump prices of petrol were jacked up with no hope of an imminent fall.
For consumers around the world, the consequences are already becoming visible.
Higher crude prices feed into the cost of petrol, diesel, aviation fuel, transportation and industrial production.
Diesel is particularly important because it powers trucks, generators, agricultural machinery and other equipment across many economies.
Brent crude, the international benchmark, climbed above $108 a barrel yesterday after Saudi Arabia suspended operations on its strategic East-West Pipeline following attacks in the Riyadh and Madinah regions.
The pipeline is a critical alternative route for Saudi crude, particularly at a time when shipments through the Strait of Hormuz have been severely disrupted by the conflict. Although prices eased slightly on Tuesday, after new data showed an unexpected rise in United States crude inventories, the retreat did little to remove the underlying supply concerns. Brent, which Nigeria’s crude is benchmarked on, gained more than $3 in the previous session.
According to experts, Nigeria, as a major crude oil producer, stands to receive higher export earnings when international oil prices rise, provided production and export volumes are maintained.
Higher prices could strengthen government oil revenues and foreign-exchange inflows. But the benefits, experts note, are not automatic.
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The country also imports refined petroleum products and remains exposed to international energy prices through the wider economy.
Higher crude prices can, therefore, improve government revenue while simultaneously increasing costs for businesses and households.
The impact will also depend on domestic crude production, refinery output, exchange-rate movements and the volume of oil Nigeria actually exports.
Reuters reported that Saudi Arabia had been rerouting roughly four million barrels per day through the pipeline, equivalent to about four per cent of global oil supply. The closure therefore immediately raised concerns among traders about how much crude could continue reaching international markets if the disruption persists.
The crisis has also affected Saudi Arabia’s Yanbu export hub.
Oil loadings at Yanbu were suspended following the attack, while Saudi Arabia reduced shipments to Europe. The development sent physical crude prices sharply higher as refiners competed for alternative supplies.
That is where the current oil crisis differs from an ordinary price rally.
The market is not reacting to one isolated disruption. Several important links in the global oil supply chain are being threatened at the same time.
The Strait of Hormuz, one of the world’s most important oil chokepoints, has experienced a dramatic reduction in traffic since the war began.
Before the conflict, more than 20 million barrels of oil and petroleum products passed through the strait each day, representing more than one-fifth of global oil consumption.
With shipping through the waterway heavily disrupted, Saudi Arabia had increasingly turned to its East-West Pipeline as a way of keeping exports moving.
That alternative has now been hit.
The Red Sea route is also under pressure. Iran-aligned Houthi forces in Yemen have intensified attacks around the Red Sea and the Bab el-Mandeb, another strategic maritime passage connecting the Red Sea to the Gulf of Aden.
The result is a complicated squeeze on global energy supplies: the traditional route through the Strait of Hormuz is severely disrupted, while an important Saudi alternative through the Red Sea is also facing attacks.
The longer this situation continues, the greater the pressure on oil inventories and alternative suppliers.
The International Energy Agency has previously warned that prolonged disruption to Middle Eastern supplies could create a significant global shortfall. The present crisis has, therefore, raised questions about how long strategic stockpiles and alternative routes can cushion the market.
For countries that import large quantities of petroleum products, a prolonged period of crude prices above $100 could therefore translate into renewed inflationary pressure.
For the global economy, the biggest danger is not simply that Brent has crossed $100.
It is that a prolonged conflict could remove more barrels from the market at a time when alternative supply routes are themselves becoming vulnerable.
Yesterday’s fall in crude prices following the unexpected 7.1 million-barrel increase in US crude inventories provided temporary relief. Saudi Arabia has also begun offering additional crude shipments through Oman’s Sohar port, helping to ease immediate fears of a complete supply squeeze. But the fundamental risk remains.
If attacks continue to hit Saudi infrastructure, shipping through the Strait of Hormuz remains restricted and Red Sea routes become increasingly unsafe, the world’s oil market could face a prolonged supply squeeze.
That would make the Middle East conflict not just a geopolitical crisis, but a global economic problem with the price of every barrel increasingly determined by the safety of the roads, pipelines and seas through which it must travel.
Nigeria must be surefooted to attract the right investment to harness her full potential in the oil and gas industry.
At the 32nd Nigerian Economic Summit (NES) during a panel session titled, “Unlocking Nigeria’s Oil Potential: The Push for More Oil”, in Abuja, the Managing Director and Chief Executive Officer of NLNG, Adeleye Falade, decried the lack of certainties in the investment environment in Nigeria’s oil industry.
He traced Nigeria’s inability to attract sufficient financing for major oil and gas projects to uncertainties over investment terms, project execution and guaranteed markets for output.
According to Falade, investors and lenders must be confident that contractual agreements will be honoured, projects will deliver as planned and buyers will be available to purchase production before committing billions of dollars to capital-intensive energy developments.
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He cited the financing of NLNG’s Train 7 expansion as evidence that investment certainty, a proven delivery record and credible commercial agreements could unlock substantial funding, even under challenging global economic conditions.
Falade explained that projects requiring huge upfront capital and 20 to 30 years to recover investments depend on confidence that the terms underpinning them will remain stable throughout their lifespan.
According to him, lenders assess not just the quality of an oil or gas resource but also the durability of the investment framework, the predictability of future earnings and the capacity of project sponsors to meet their obligations.
Falade pointed to the $3 billion in external financing secured from 31 local and international financial institutions for Train 7 in 2020, at the height of the COVID-19 pandemic, as proof of the importance of a credible investment proposition.
The project is being financed through a combination of internally generated cash flows and external funding, underpinned by NLNG’s record of developing six operating trains and repaying the loans used to finance their construction.
He said that track record gave lenders tangible evidence of the company’s capacity to execute complex projects and honour financial commitments, reducing the uncertainty that often discourages investment in capital-intensive developments.
He noted that each successful expansion strengthened NLNG’s credibility and positioned it to secure subsequent financing on more competitive terms.
He identified three fundamental questions that lenders seek answers to before financing major energy projects: “Who buys the product? Who carries the risk? Who stands behind the project?”
For NLNG, he said, long-term sales and purchase agreements, some spanning 20 years, provide the commercial foundation required to secure funding before a final investment decision is taken.
A call has gone to West African countries to adopt uniform fuel specifications, strengthen testing capacity, address infrastructure gaps and improve enforcement systems to facilitate more effective regional petroleum trade.
This formed the bulk of the submission of petroleum regulators at a panel session during the 20th OTL Africa Downstream Energy Week that ended in Lagos.
It is the considered opinion of the regulators that inconsistencies in standards across the region remain a huge disservice to fair competition. Therefore, they expressed a common view that putting in place an acceptable standard will ensure a harmonised fuel quality, improve infrastructure and stronger regulatory coordination which will facilitate cross-border trade and reduce market barriers across the region.
Speaking at the session themed: “Regulatory Convergence in African Oil and Gas Markets,” the Authority Chief Executive (ACE), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Rabiu Umar, argued that differences in fuel specifications across countries made it difficult to compare products and ensure fair competition.
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For instance, he explained that the disparity between diesel specifications of 50 parts per million (ppm) and 1,500 ppm, presents a complication in efforts to harmonise standards across the region.
To this end, the ACE said the sub regional countries needed common product specifications and coordinated production rules to facilitate trade and promote competition.
Umar also advocated the establishment of a West African reference price for petroleum products, saying regional markets needed to strengthen trade among African producers.
On his part, the Chief Executive Officer of Ghana’s National Petroleum Authority (NPA), Godwin Tameklo, said that inadequate infrastructure was a major constraint to regional petroleum trade.
According to him, countries needed to address infrastructure gaps, regulatory differences and market constraints to improve the cross-border movement of petroleum products.
For instance, he disclosed that Ghana’s port and storage facilities could not always accommodate volumes delivered by larger vessels, forcing operators to consider smaller shipments or alternative arrangements.
Tameklo also stressed the need for clear implementation timelines to ensure that regional harmonisation initiatives translated into practical results.
In a similar vein, the Director of Water, Petroleum and Electricity at The Gambia’s Public Utilities Regulatory Authority (PURA), Musa Njie, highlighted the importance of laboratory facilities in testing petroleum product quality.
Njie identified the absence of a laboratory for petroleum product testing as one of the challenges facing The Gambia, and stressed the need to strengthen national quality assurance systems.
He said that harmonisation efforts should protect public health and the environment while improving market efficiency.
Njie also called for stronger coordination between regional frameworks and national regulatory institutions to ensure effective implementation of agreed standards.
As part of efforts to achieve Nigeria’s 60 percent methane emissions reduction target by 2035, a technology-driven platform designed to improve methane monitoring, reporting and regulatory enforcement, the Nigerian Oil and Gas Industry Emission Tracker (NOGIET), has been handed over to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
The Commission Chief Executive of the NUPRC, Oritsemeyiwa Eyesan, performed the handing over of NOGIET at the Commission’s headquarters in Abuja.
This was revealed in a statement the NUPRC Head of Media and Corporate Communications, Eniola Akinkuotu, issued on Thursday.
According to the statement, the Executive Commissioner, Health, Safety, Environment and Community (HSEC), Captain John Tonlagha, who represented the Chief Executive, disclosed that the initiative forms part of the Commission’s efforts to intensify the implementation of its 2022 Guidelines for the Management of Fugitive Methane and Greenhouse Gas Emissions in the Upstream Oil and Gas Sector.
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The guidelines require operators to transition from estimation-based to measurement-based emissions reporting by the first quarter of 2027.
Eyesan said the platform aligns with the Commission’s digital transformation agenda and Nigeria’s broader commitment to reducing methane emissions, eliminating routine gas flaring and achieving net-zero emissions by 2060.
“NOGIET integrates satellite-based methane plume detection, regulatory mapping of oil blocks and pipelines, and facility-level emissions measurements to help regulators identify emission hotspots, detect discrepancies in reported data, prioritise inspections and strengthen compliance monitoring,” the CCE said.
She emphasised that the effective integration of NOGIET into the Commission’s regulatory monitoring and data management systems would strengthen the credibility, consistency and reliability of emissions data.
The platform was developed through a partnership involving the Stakeholder Democracy Network (SDN), with financial and technical support from the Global Methane Hub (GMH).
It is designed for use by both the NUPRC and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), promoting a coordinated approach to methane management across the oil and gas sector.
Eyesan commended the Global Methane Hub for its financial and technical support and SDN for its leadership, coordination and commitment to delivering the initiative.
In his remarks, the Board Chairman of SDN, Inemo Samiama, noted that the platform’s ability to compare satellite observations with facility-level measurements would help regulators identify potential discrepancies and take evidence-based enforcement action. EyeSamiama said, “SDN hands over NOGIET in full, front end and back end, at no cost to the Commission.
The platform will move from its temporary home at nogiet.ng to the Commission’s own subdomain. Because methane does not stop at the boundary between upstream and downstream, NOGIET is designed as one platform for the whole oil and gas sector.”
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