Crude oil price fluctuations expose Africa′s fossil fuel dependence | Africa | DW | 27.10.2021

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Crude oil price fluctuations expose Africa's fossil fuel dependence

Africa's abundant sunshine is ideal for renewable energy production. But the continent relies heavily on crude oil. Experts warn that the economy will continue to suffer if governments don't wean themselves off of oil.

An oil well in Sudan

Africa is bearing the brunt of rising fuel prices around the world

As fuel prices skyrocket around the world, it has become clear that African countries will remain exposed to the detrimental impacts of sporadic price fluctuations — at least until the global shift to renewable energy is realized.

Many African nations' economies are fueled by petroleum, leaving the continent particularly vulnerable to volatile international fuel price fluctuations. In most countries, the price surge has exacerbated a spike in inflation. 

"This is because the cost of energy remains one of the key elements considered in calculating inflation," Patrick Obath, a Kenya-based petroleum economist tells DW. 

Living costs soar in Kenya

Kenya is currently struggling with the gas market chaos, the rising cost of living — including food — and high prices at the pumps.

"When you look at the foodstuffs that an average African eats, the cost of fuel is a key ingredient in determining the ultimate price on what lands on the table of an average African home," explains Obath.

This trend is expected to worsen in the coming months, with fuel prices likely to increase even further due to a surge in post-pandemic demand.

A gas station in Paris where fuel prices rose to nearly two euros per litre

Fuel prices, pictured here in France, have soared around the world as economies bounce back from the impact of the coronavirus pandemic

"The fact that there is a robust move to [open] up facilities that were shut during the coronavirus period [means] demand will be at record levels," says Obath. "This shall equally translate to continued high prices."

Kenya's Energy and Petroleum Regulatory Authority recently lowered fuel prices slightly following public pressure to reduce costs. 

A 6% increase in fuel prices in September left many Kenyans reeling after the government dropped subsidies that had capped local pump prices. 

But despite the slight reprieve, the ripple effect of high gas has continued to hurt many sectors, particularly the public transport sector, which is predominantly controlled by privately owned mini-buses known as matatus

The cost of keeping their businesses afloat has become unmanageable for some, with many owners resorting to selling off their mini-buses or keeping them in storage until fuel prices drop. 

Matatu driver Samuel Ngugi has lost three consecutive jobs in less than four months. He says his profession is already insecure and adding the high cost of fuel to the equation only makes things even more difficult. 

Decorated and refitted privately-owned public transport buses, popularly known as 'matatu' at a drop-off point in Nairobi

Matatu drivers in Kenya have been particularly hard hit by sky-high gas prices

"Last week my new boss, the owner of the matatu I was driving, sold it off citing the high cost of maintenance," he tells DW. "He said that he can't afford to continue paying me. I don't know what to do. This job is so unpredictable now and the key problem is the high fuel prices."

South Africa and Nigeria not spared

South Africa also hasn't escaped the effects of high fuel prices, with agricultural industry association Agri SA warning that prices would reach "catastrophic proportions" in November. 

Agri SA has expressed concerns that the combined costs of fertilizer, diesel, electricity and labor were making it extremely difficult to produce food sustainably.

South Africa's "slate levy," a self-adjusting mechanism used by the government to deal with daily differences in petrol prices, has also come under scrutiny. Under the country's current system, the basic fuel price only changes once a month, although the real basic fuel price changes every day. This means any additional costs — or savings, in better times — are passed on to fuel consumers the next month.

An oil and petrochemical refinery, Kaduna, Nigeria

Nigeria's economy remains extremely dependent on oil

Meanwhile in Nigeria — the continent's largest oil and gas producer — a long-standing economic dependency on fuel is quickly proving unsustainable for consumers. 

According to Ahmed Adamu, a petroleum economist based at the Nile University in Abuja, it is consumers who will bear the brunt of erratic prices.

"There is a lot of responsiveness of the oil prices to socioeconomic situations, and this affects the economy in terms of expectations and the prediction of oil revenue," he tells DW. 

Is there a solution?

While going green appears to be the most obvious long-term solution to Africa's fuel price woes, the renewable energy revolution is unlikely to happen overnight.

In light of the climate crisis and as the continent brims with untapped hydro and geothermal sources, African governments are being urged to transition to renewables as a major potential source of energy. Until then, the region is likely to continue to struggle in coping with surging fuel prices. 

Watch video 02:49

Pressure on gas prices not easing anytime soon

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