Political Peak Oil: Price Spikes to $100 on Nigerian Unrest

In Nigeria, six armed men killed four policemen and three civilians before being killed themselves. The nation's oil infrastructure wasn't damaged, and the flow of oil wasn't disrupted.

But the unrest helped send oil futures soaring to $100 a barrel, where the price continues to hover in the first day of trading of 2008.

This is peak oil.

No, it's not that we've pumped up every drop of crude oil that million-year-old plankton provided for us. Not necessarily. This isn't geologic peak oil. It's political peak oil.

Here's how we define political peak oil at The Daily Green: The world supply of oil is tight, tight enough that any disruption – or threat of disruption – to that supply causes price spikes with real consequences.

Peak oil itself, as a theory, has to do with the geology of the Earth; our ability to access oil locked up in shale or sand, in deep-water, or under the melting Arctic; and the rate at which we're pumping and using the oil that is available. Once we need more than we can pump, prices spike and turmoil ensues. Political peak oil has to do with the likes of political unrest, terrorism and – in a real way – fear. It's the economics of oil, with an unhealthy dose of violence. Because we need all the oil we can pump, any political unrest in key nations causes prices to spike (and, often, turmoil to ensue).

Nigeria wasn't the only reason prices rose sharply Wednesday. OPEC warned that its members might not be able to meet world demand by 2024 and Mexican oil ports were shut due to bad weather, according to the Associated Press. The Wall Street Journal also pointed to "a weaker dollar and investment funds' portfolio-shifting in the new year." AFP noted "falling energy inventories in the United States."

But the AP put it all into this context: "Oil prices soared to $100 a barrel Wednesday for the first time ever, reaching that milestone amid an unshakeable view that global demand for oil and petroleum products will continue to outstrip supplies."

The backdrop of rising demand and serious doubts about the ability of oil producers to meet it over the long term makes political turmoil cause peak oil-esque price spikes in the short term. Nigeria, in 2006, was the world's eighth-largest oil exporter, and its 12th-largest oil producer. As with other top-producers, like Saudi Arabia (No. 1), Iran (No. 4), Venezuela (No. 9) or Algeria (No. 14), if anything threatens to disrupt the supply flowing from Nigeria, the world's oil market reacts violently.

Human violence breeds oil price volatility. That's political peak oil.

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