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BOOMING OIL PRICES are making it harder, not easier, to find a solution to armed conflict in Nigeria’s oil-rich Niger Delta region. One U.S. academic says surging oil revenues are creating a “sustainable stalemate” between government forces and well-armed rebels. Neither is strong enough to crush the other, and neither feels any pressure to concede ground.

Although the conflict is driving down Nigeria’s oil output, record prices are fueling an economic bonanza. Production has fallen every year since 2006 to a low of 1.95 million barrels per day in March 2008, according to Paris-based International Energy Agency. Yet the International Monetary Fund expects Nigeria’s economy to grow 9 percent this year and 8 percent in 2009 after years of stagnation.

Rebels linked to the Movement for the Emancipation of the Niger Delta (MEND) have been fighting government forces since 2006 to demand a greater share of the region’s oil output. They ended a ceasefire in April and resumed kidnapping of oil executives and their families, assaults on oil installations, and clashes with government troops.

President Umaru Yar’Adua has maintained a strong military presence in the region, fueling accusations of human rights abuses, and deepening resentment among the local population. But the military activities have not prevented rebels from shutting down 25 percent of the country’s oil production capacity of 2.47 million barrels per day (bpd).

“There is a fundamental problem, which is that there is an unfortunately sustainable equilibrium in terms of the conflict,” said Peter Lewis of Washington D.C.’s School of Advanced International Studies, who spoke at a conference organized by the U.S. government’s Institute of Peace. He said that even though one quarter of Nigeria’s oil production is shut down, the government is not under economic pressure to make concessions.

“With oil at $120 a barrel, with $50 billion to $60 billion in foreign reserves, a budget surplus, and the naira appreciating against the dollar, shut-downs are tolerable,” said Lewis.

The oil companies are also sufficiently profitable that they can “handle” a loss in output from Nigeria. Global oil markets are responding to unrest in Nigeria by driving prices even higher.

Federal forces and militias are also “evenly matched” said Lewis. Rebels have rocket propelled grenades, missiles, machine guns, and bazookas in their arsenal. Worse, powerful local governors are defying the authority of the federal government in Abuja by raising and paying for militias as they build up their own local fiefdoms. “It’s very difficult to see how Abuja can get a grip on this,” said Lewis.

The rebels are also fracturing. “MEND has some authority, but it’s increasingly limited,” according to Rolake Akinola, senior West Africa analyst at Control Risks.

The movement is driven less by political, human rights, and environmental grievances than before. Now, economic factors are becoming more noticeable. Rebels are stealing oil from pipelines and are participating in organized crime.

Locals are indifferent to the political struggle, says Dafe Ideh, a former Delta resident now living in the United States. “People are too worried about putting food on the table to think about politics or the rebels.” Ideh said finding work is their only priority. “Thirty percent of the people can get work in the oil industry but 70 percent can’t, so they are poor,” he notes.

Nigeria is relying on offshore oilfields for a growing share of its output, which government officials believe will be easier to defend from rebel attack than land-based wells. “But it’s foolish of them to think that [rebels] can’t hit those offshore facilities,” says Darren Kew, a Nigeria expert at University of Massachusetts, Boston.

Offshore oilfields are more expensive to operate and to defend than onshore facilities. “An oil company can prospect, explore, and pump oil without ever having to go onshore. But only a few companies can do this, and it is expensive,” says Kew.

Attackers have taken speedboats up to 50 miles out into the open ocean to attack offshore platforms. In response, companies are equipping platforms with early warning systems and antipiracy devices such as nonlethal, electrifying fences or sonic blasts. A few platforms may also have armed naval personnel.

As with any such threat, however, the enemy will adapt to these measures. Notes Kew: “The militia will watch what the companies are doing, and they will learn and adapt.”