Behind rising oil cost: Nigeria

For part of the answer, drive three hours from Port Harcourt, the capital of Nigeria's oil-rich delta region, past swampy rivers with fishermen in dugout canoes, down a bumpy dirt track to Iwhrekan, where 1,000 villagers live in run-down concrete and mud-brick buildings.

FISHING GONE: A resident of Iwhrekan shows how an oil spill ruined one of the village's key fishing creeks. ABRAHAM MCLAUGHLIN / THE CHRISTIAN SCIENCE MONITOR

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On July 21, 2005, the pipeline that runs near here ruptured. Streams of black goo oozed into farmers' fields and a fishing creek. Because of a complicated dispute between villagers and the major oil company in this region, Royal Dutch Shell, the oil hasn't been cleaned up. Black residue still covers thousands of plants.

Residents are angry. "We will face Shell," says village chairman Daniel Oweh surrounded by agitated young men. "The next stage will be violent."

Threats like this are increasingly being carried out - helping drive oil to $66 per barrel this week. Four international oil workers were taken hostage by armed men in speedboats last week. Nigeria's production has dropped by nearly 10 percent.

It could get worse. "The loss of more Nigerian oil could send the price to $80 or $95 per barrel or higher," says David Goldwyn, a former US assistant energy secretary who now consults in the region. Given the instability here, he says, "The likelihood of a significant disruption" to Nigeria's output of about 2.6 million barrels per day "always has to be counted as relatively high."

Militants warn of more attacks

Militants calling themselves the Movement for the Emancipation of the Niger Delta are holding the four hostages - an American, a Briton, a Bulgarian, and a Honduran. They have threatened even more aggressive moves against oil workers and their families soon. Shell has evacuated 330 employees.

Already, two attacks in recent days on some of Shell's roughly 1,000 oil wells and 80 pumping stations caused a drop of 220,000 barrels a day in output - nearly 10 percent of Nigeria's 2.5 million barrels a day in exports.

Tensions over Iran are also driving the global price higher. Iran is the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) and exports about 4 million barrels a day. Oil markets are jittery over fears Iran might cut exports if hit with UN sanctions for resuming its nuclear program, which it announced it would do last week.

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