Darker clouds ahead as US starts exporting crude after 40-year ban

The first shipments of American crude have left US ports for Europe just weeks after US Congress lifted a 40-year ban on exporting oil.

The oil export ban was signed into law in 1975, part of the reaction to an OPEC embargo that created a shortage of crude and slammed the American economy with skyrocketing prices.

Today, the world has too much oil, partly due to America’s shale oil boom and Iran, which has been readmitted into the international market.

Crude oil prices have crashed below $35 a barrel and analysts have projected this trend to worsen.

America’s re-emergence as an oil exporting country potentially compounds the woes of other oil exporting nations, including Nigeria.

Already, the fall in crude oil prices has caused a budget deficit for the year 2016.

The N6.08 trillion 2016 budget proposal has a deficit of N1.84 trillion, which is to be financed by a combination of domestic borrowing of N984 billion and foreign borrowing of N900 billion. The deficit continues to increase as oil prices dwindle and the value of naira weakens against the dollar even as government plans to revive the flagging economy by tripling capital expenditure.

Nigeria’s economy has been hammered by a plunge in oil prices, which has weakened the naira, delayed the payments of civil servants and forced companies to fire thousands of staff.

With renewed competition coming from American oil exports, things are likely to get worse unless new sources of revenue are urgently unveiled.