SOMO_CISLAC Report Vitol

Energy traders: missing links in the oil industry

Oil trading is generally characterised by limited transparency and challenging business environments.
The weak rule of law in many oil-producing countries has contributed to violent conflicts over the
control of oil production and revenues. In several of these resource-rich countries, the combination
of fragile institutions, high potential gains, and the opacity surrounding actual sales, has created an
environment in which corruption thrives. Alongside other players in the industry, such as state-owned
enterprises and foreign public officials, oil traders have been accused of illegal practices.

Given the economic importance of oil traders to oil-producing countries, this is highly problematic.
Oil trading companies engage in high-volume transactions with governments and state-owned
enterprises. Proceeds from oil sales often fund a significant part of the government budget and,
in some cases, are the country’s largest revenue stream; this is true of Nigeria. If managed well,
these huge sums can have a transformative impact in terms of providing welfare to the populace.
But, if managed badly, governments can suffer significant losses in revenues, seriously impacting
their ability to deliver on socio-economic rights such as health, education, clean water, and housing.

Read the full report below.