Oil Drilling in the Niger Delta

In a little-known story from the southeastern United States, a large oil rig recently exploded in the Gulf of Mexico, releasing a nominal amount of mildly polluting oil into ocean, killing a few birds and galvanizing retirees in Florida – a political sleeping giant – into action.  This minor environmental calamity, which can hardly be considered more than a nuisance, is indeed tragic, but it pales in comparison to what happens elsewhere in the world.  Take this article from the Guardian, a British tabloid newspaper:

With 606 oilfields, the Niger delta supplies 40% of all the crude the United States imports and is the world capital of oil pollution. Life expectancy in its rural communities, half of which have no access to clean water, has fallen to little more than 40 years over the past two generations. Locals blame the oil that pollutes their land and can scarcely believe the contrast with the steps taken by BP and the US government to try to stop the Gulf oil leak and to protect the Louisiana shoreline from pollution.

“If this Gulf accident had happened in Nigeria, neither the government nor the company would have paid much attention,” said the writer Ben Ikari, a member of the Ogoni people. “This kind of spill happens all the time in the delta.”

The real cost of the Gulf oil spill

This is the norm for oil-rich nations in Africa.  At the risk of sounding like a bleeding heart liberal, oil companies exploit the resources of poor African nations with little regard for the local population or the environmental impacts.  It is hardly covered, only getting media attention when a comparatively smaller spill occurs off the coast of the U.S.   Compare these two examples.  First, from Pensacola, Florida:

Hundreds of thousands of tourists flock here every year to surf, swim and sunbathe. But this season, the coastline is less pristine than the locals would like.

Globules of thick brown tar have started washing up on shore. Some are as small as a coin, others are as big as a doormat.

“We live off these four or five months in the summer that’s how I make a living, but it’s gone,” says Dave Bohanan, who owns a burger restaurant on Pensacola Beach.

“My sales are down at least 10% already. And it will get worse.”

And this one from Nigeria:

Small children swim in the polluted estuary here, fishermen take their skiffs out ever farther — “There’s nothing we can catch here,” said Pius Doron, perched anxiously over his boat — and market women trudge through oily streams. “There is Shell oil on my body,” said Hannah Baage, emerging from Gio Creek with a machete to cut the cassava stalks balanced on her head.

I am not trying to draw comparisons about which is worse (I have never been to Florida, though maybe this is their comeuppance for the hanging chads controversy that would’ve sent Al Gore, an environmental warrior, to the White House).  But this oil spill just seems like the reality of offshore oil drilling.  It is a tradeoff, something we have to deal with if we are going to pursue it.  And what has happened in Nigeria for the last 50 years shows that it isn’t anything new.  Nigeria produces 10% of the oil consumed in the United States, with hardly any acknowledgement of the costs.

The situation in Nigeria is actually far far worse, since the oil revenues generated from leasing the land Shell and other oil companies keeps the corrupt and ineffective government in power.  In the book The Bottom Billion, economist Paul Collier describes four poverty traps that keep the poorest countries in the world from making any forward progress.  In researching why these “bottom billion” countries where the only countries in the world with a shrinking GDP, he came to a conclusion:

His findings are the result of over three decades of research, solid statistical analysis, and time spent in Africa. His investigation led him to discover a series of traps that extremely poor countries tend to fall into, which, left unchecked, will define their future. He discusses each at length. Briefly, they are conflicts; dependence on natural resources, such as diamonds and oil; land-locked geography, which makes these countries dependent on their neighbor’s transportation system; and bad governance.

The trap of being resource-rich seems counterintuitive, since resource extraction provides a major source of revenue for the country.  But it also relieves the government of the responsibility of having to invest in the infrastructure that generates real growth independent of resources.  Governments are responsible for providing services to the people, usually by generating taxes from economic productivity.  But when the well runs dry, disaster strikes, according to Collier:

What we found was that in the short term everything is hunky-dory. Things go up. They really go up. You have booms. Income goes up; output goes up; everything goes up. That is happening at the moment. It’s the predominant reason why Africa is now growing faster. So the short term just looks great.

How about the long term? It depends. But if we take the typical country, the long term is not hunky-dory; it’s Humpty Dumpty. That is to say, you fall off a cliff. If we track the typical resource exporter in Africa and we run it through this global pattern—I will just run you through GDP, national income. This is in terms of real output relative to counterfactual. We started at 100 now. By 2010, it’s 110. So it’s up 10 percent relative to counterfactual. By 2025, it’s at 75. It’s down 25 percent as a result of the commodity booms relative to counterfactual—a massive loss. So instead of these huge revenues being harnessed for sustained growth, they actually become a disaster.

The situation in Nigeria is the BP spill magnified a thousand times, in terms of environmental cost.  And in terms of economic development, it is certainly a contributing factor to why the country remains so poor.  And, on top of it all, they started off dominating Greece in their World Cup match last night, only to play with a man down after a red card.  They eventually lost the game 2-1 against a country populated by lazy tax-evaders that has almost destroyed the European economy, damaged the U.S. economy, resulting in further declines in the amount of international aid we send to countries like Nigeria.  It probably deserves more attention, just like most of the injustices in this world that I don’t know about.

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