Crude oil price fluctuations expose Africa’s fossil fuel dependence

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

The economies of many African nations 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 told DW.

Living costs soar in Kenya

Kenya is currently struggling with the gas market chaos, with the costs of living — including food — on the rise, further compounded by sky-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.

“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 decreased fuel prices slightly following public pressure to lower 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.

Now, the cost of keeping their businesses afloat has become unmanagable 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 as it is, and adding the high cost of fuel to the equation only makes things more difficult.

“Just last week my new boss, the owner of the matatu I was driving, sold it off citing high cost of maintenance,” he told 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 African 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 (BFP) only changes once a month, although the real BFP changes every day. This means any additional costs — or savings, in better times — are passed on to fuel consumers the next month.

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

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 socio-economic situations, and this effects the economy in terms of expectations and the prediction of oil revenue,” he told 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.

With the continent brimming with untapped hydro and geothermal sources, African governments are being urged to seriously consider renewables as a major potential source of energy. Until then, the region is likely to struggle to cope with surging fuel prices.