PREVIEW
A few oil and gas exporters will see upside if prices stay higher but most economies will pay heavily
‘Wait and see’ is the verdict of many African ministers as they weigh the impact of the Middle East war on oil prices. That is the stance that Angola’s Economic Coordination Minister José de Lima Massano plans to take, despite the fact that the US$93 a barrel Brent Crude price – as Africa Confidential went to press – is now comfortably above the $61-a-barrel benchmark used for Angola’s budget forecasts.
Oil prices are likely to increase further in the short term if Qatar's Energy Minister Saad al-Kaabi warning that all oil and gas exporters in the Gulf will stop production within days is borne out. Many market experts say the disruption could be bigger than the Covid-19 pandemic in 2020 (AC Vol 61 No 12, From great crash to weak bounce).
Kaabi added that oil could hit $150 if the United States/Israeli war on Iran continues for another month, which would have a comparable hit to African and other economies to Russia’s full-scale invasion of Ukraine in February 2022.
While Africa’s oil exporters stand to benefit from a prolonged conflict and resulting oil price volatility, the continent’s 38 net oil importers are watching anxiously. A paper for Bloomberg Economics reckons that Angola, Nigeria and Ghana are the only African countries whose current account will be improved if prices stay north of $85. Congo-Kinshasa, South Africa and Kenya would be the worst hit by high prices, the note adds.
Fuel pump prices are already cripplingly high in Kenya, and the Ruto government’s failure to put in place a three-month strategic fuel reserve because of a lack of funds, leaves it highly exposed to supply disruption.
South Africa, meanwhile, cut about half of its refining capacity over the past five years, leaving it vulnerable to higher prices. Senegal, Somalia and Malawi are among a group of countries whose governments have held crisis talks with industry leaders in recent days about the economic effects of the oil price spike.
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