...In Nigeria, Money for the Poor Just Disappears

cannot do without his oil. We get 10% from Venezuela, making it the third largest supplier to the United States after Canada and Mexico. But there may be more to Chavez’ affronts than just name-calling. He is forging alliances with oil companies in China, India, Iran and Brazil and has threatened to sell refineries in the U.S. These are indicators that he may cut off the U.S. and sell his oil elsewhere.

Mexico poses a different sort of threat. The country long ago nationalized oil; all exploration and production is housed in government-owned Petróleos Mexicanos, or Pemex. Mexico’s view is that Pemex exists to fund the government. In 2006, for example, it drained $79 billion of the company’s $97 billion in revenue, a practice that has forced the company to borrow over the last five years. The Mexican congress even approves its budget, and sets export levels, which has brought about an emphasis on pumping more oil to feed the treasury which has short-changed exploration. The company sits on tens of billions of barrels of reserves, but most is in deep water in the Gulf of Mexico, is costly to produce, and the company is left perpetually short of cash. What drilling Pemex has done has yielded little, partly because, facing no competition, the company lags in the latest technical expertise. As a matter of national pride, Mexico refuses partnerships with more savvy international companies.

The hazard is that the U.S. relies on Mexico as its second largest source for oil, sending us 1.6 million barrels daily, but production has begun to decline in the last two years. Output from its principal field, Cantarell, has been dropping rapidly, as much as 15% a year. Meanwhile, demand for oil at home has been rising. The question is, when might the two lines on the graph converge – production versus demands at home – drying up the pipeline to the U.S.

Nigeria's oil-rich Niger River delta yields a light, sweet crude that needs the least refining. Its 2.4 million barrels a day is 3.9% of world output. It is the U.S.’s fifth largest source.

By constitution, 13% of oil revenue must go to the nine oil-producing states of the delta. That came to $6 billion in 2006, more than ample to improve the lives of the delta’s people. But according to the World Bank, the money paid to the governors’ offices has a tendency to vanish in a country where most of the oil wealth goes to 1% of the population.

The delta’s people live in dreadful conditions. Their communities -- one of them literally built on garbage – have no schools, no medical clinics, no clean water. Oil companies in their midst pump billions of dollars per year and leave behind environmental pollution. This has given rise to bands of marauding militants, the Movement for the Emancipation of the Niger Delta – MEND – being the most