Climbing oil prices may be a headache for the West, but could provide Africa with much needed development revenue.
As oil prices approach last year’s all-time high of $78.65 a barrel and Goldman Sachs warns that prices could surge to $95 a barrel within six months without extra output from Opec (the Organization of the Petroleum Exporting Countries), the implications for many aspects of the global economy are significant. But while developed countries consider the impact of higher oil prices on inflation and possibly interest rates, the effects are being felt in very different ways elsewhere, not only in the Middle East but also in often-ignored Africa.
The doubling of oil prices from 2002 to 2006 has resulted in massive growth in Middle East export earnings. With prices averaging more than $60 a barrel, the current account surpluses for the six Gulf Co-operation Council (GCC) states in 2006 are estimated at $240bn and the IMF puts the current account surplus of the Middle Eastern oil exporters as larger in dollar terms than China and the rest of emerging Asia.
Further imbalance
So if oil prices break through the $80-a-barrel barrier – and there is clearly greater demand than supply, which looks likely to continue – Middle East revenues could jump by a third or more and global imbalances could take a further hit.
But Africa, where average growth has exceeded the global average since 2001 and where 27 states have consistently achieved growth rates of more than 5% a year in the past five years, could be a major beneficiary. Banks such as the UK’s Standard Chartered, South Africa’s Standard Bank and Russia’s Renaissance Capital are seeing the huge potential in the continent, and China, in particular, has seen the opportunities, investing $11.7bn in Africa up to the end of 2006 to demonstrate its commitment. In the first nine months of 2006, China imported 34 million tonnes of oil from 13 of Africa’s 17 oil-producing countries, accounting for 31% of its total oil imports.
Oil, along with other minerals, can be a critical catalyst for Africa’s growth and with sub-Saharan Africa increasing its exports to China at an average growth of 40% a year since 2002, Africa’s economic transformation is genuinely on the move. High oil prices may be a problem in the West but they can also be a springboard for massive development in the Middle East and, especially, much-neglected Africa.
