Tuesday, March 18, 2008

Oil: Oil prices creating the best of times and worst of times for Africa

An oil rig in northern Niger.

High oil prices are creating the best of times and worst of times for Africa. That is according to several experts speaking this week at an oil industry conference in South Africa. For the handful of countries that export oil, times are good. But times are tough for everyone else. For VOA, Terry FitzPatrick reports from Cape Town.

Many economists regard Africa as the frontier in oil development. Four of the 13 members of OPEC are in Africa, and more nations want to join. But not everyone is benefiting from the current oil boom.

"You are coming to an economic situation of have's and have-not's," said Tyrena Holley.

Tyrena Holley is a business expert with the U.S. Consulate in Cape Town.

"I have met oil companies that are well-meaning to go into production and then spread the wealth within the country," said Holley. "I have yet to see it cross several borders to include the whole continent of Africa."

Continent wide, rising oil prices are likely to hurt Africa more than help it. That is according to independent analyst Simon Ratcliffe. He told delegates at the Oil Africa Conference that poorer nations have fewer resources to withstand rising energy costs.

"Each county has a threshold of what they can bear before it significantly affects their economies," said Simon Ratcliffe. "And within countries you have personal thresholds of what people or families can bear, and again it primarily affects the poorest."

Ratcliffe says these effects include electricity blackouts, slower economic development, higher food prices and political instability. Others at the conference predicted the growth of a middle class in Africa will make the situation worse.

Eduardo Lopez tracks oil trends for the International Energy Agency.

"When income levels reach a certain stage, you have a manufacturing sector emerging and demand really takes off," said Lopez. "Why? Because this is the threshold where income per capita is high enough to allow people to move into a new dimension in terms of energy use. They would like to have a car. They would like to have a refrigerator, air conditioning and whatnot."

South Africa's Minerals and Energy Minister Buyelwa Sonjica asked industry representatives to do a better job of spreading oil wealth. She said it is unacceptable for African countries to export oil while their own people must use firewood.

"Africa is a net exporter of energy," said Buyelwa Sonjica. "But Africa is a 'dark continent.' It is our responsibility to insure that our resources are used to develop our peoples so that they have a standard of living that befits an energy rich continent."

Sonjica noted that African refineries and oil rigs waste energy by burning-off unwanted natural gas. She said companies should capture it for use by the poor.

By: Terry FitzPatrick Cape Town17 March 2008
Published with the permission of Voice of America