Chairman International Energy Services Limited Dr Diran Fawibe in this interview with the Publisher/Editor-in-Chief, Nigerian NewsDirect, Dr Samuel Ibiyemi speaks on the future of oil prices and Nigerian economy. Excerpts
Well, 2015 was a momentous year in the sense that the industry witnessed a tough period which was similar to 1982 or 1998, but this time it is a more serious situation than the previous years. In 1998 for instance, there was a decline in the price of oil, but the rate of the decline was not as much as it was in 2015 where there was a free fall. In 2014, the price of fuel was over $100, 110,140 dollars per barrel, In fact in July 2014 the price was $145 dollars per barrel, but at the close of 2015, the price declined to 40 dollars per barrel and today we are talking of something less than 30 dollars per barrel. So, we have never witnessed such a drastic decline.
About 70 percent of the oil price just wiped off just like that for just over a year period. This is one major issue, it wasn’t that there was no market to ensure production, it either continues to produce oil at over 2 million barrel per day and the world productions continue to increase at about between 92 and 93 million barrels per day. OPEC supply in 2015 was about an average of 31.3 million barrels per day contrary to 30 million barrels per day that OPEC planned to supply because that was the level of production that OPEC was having at the time a decision was taken in November 2014 that they were going to maintain the same level of production with the hope that it will stabilize the price. Now the situation we witnessed then was that of free fall and a glut in the oil market, and the glut we don’t see the end to the glut because some of the factors that called for the increase have not stopped. For instance, Saudi Arabia continues to pump oil into the world market and it is one major oil producer that can cut back production as it will have substantial effect on the market, in fact Saudi Arabia was a major contributor to the free fall because when Saudi Arabia announced that it would be ready to keep producing even if the price fell to $20 dollars per barrel, that was a very significant statement to be made in the market that whatever the price is, Saudi Arabia will continue to pump out oil.
So, it became a self fulfilling prophecy and now we are getting to a point, and we only hope the price will not go down to $20 per barrel. Now to show that they are unrepentant when it comes to free fall or that they will continue to pump oil ostensively to defend their market share, but we know that there are some other factors, especially the political factors underlining this decision to continue to produce more and more oil. Now US continues to pump more oil too because some of the increase in the market was contributed by US, we have increase from some other countries like, China, Russia, Canada, Norway, Brazil and majorly, non OPEC countries are pumping oil into the market. I think there was an under-estimation of what could come from some of these non OPEC countries. The end result was that there is a glut which will take sometimes to mop up. If OPEC now decides to even cut back production, what happens if these other countries continue to pump more and more? And that is the main reason Saudi Arabia made the statement that if it decides to cut back production, these other countries will fill in and then the effect of the reduction will not be very substantial and this has affected most countries. For instance, because of drastic