Africa has not benefited from the low crude oil price because of currency deterioration in most countries on the continent, an energy expert has told the Africa Energy Conference taking place in Johannesburg, South Africa.
Indeni Petroleum Refinery Board Chairman, Mr. Johnstone Chikwanda, who is also Energy Forum Zambia Chairperson, has pointed out that with the depressed oil price on the global market, one would have thought that this would advantage African countries by enabling them to pass on the benefits of low price to consumers.
“The scenario is totally the opposite. Africa has not benefited at all to a point that some countries have actually been increasing pump prices during this period.”
Mr. Chikwanda said it was a painful missed opportunity for African countries that the drop in crude oil price was happening at a time when the value of their currencies had significantly deteriorated.
“It must be reiterated that fuel pump prices are fundamentally dictated to by a dichotomy of the exchange rate and the spot price on the global market,” he noted.
The crude oil price has been falling since 2013 and had so far dropped by over 60 per cent; a situation he said has had tremendous negative impact on oil producing African economies.
He was speaking on the theme ‘Upstream and Midstream Petroleum Value Chain’ which sought to bring out the impact of the global low crude oil price on Africa, on explorations and implications on refineries.
The session also pondered on who was benefitting from the current low prices.
Mr. Chikwanda, whose presentation was overwhelmingly well received by the audience, said the fall in price had wreaked havoc on oil exporting African economies in terms of revenue generation which they had lost. The current scenario in the oil sector had also slowed down investments around exploration works for oil and gas in Africa.
He said the situation was likely to persist for the next couple of years and that diversification of economies into agriculture, aquaculture, tourism and other identified sectors should be pursued vigorously.
Mr. Chikwanda said Africa needed to increase refinery capacity including building new facilities which could support regional economic growth and further invest in projects such as pipelines, rail and fuel storage facilities. These projects would strength regional integration and intra-Africa fuel trade.
“It is sad that at the moment, a lot of African countries that produce crude oil export the product and then import refined fuel at great cost. It is anticipated that by 2025, increased demand for fuel will create serious logistical challenges in terms of critical shortage of storage facilities. Transportation of fuel by road will not solve the problem in a significant way. Hence the case for investing in rail and pipeline remains valid,” Mr Chikwanda said.
He urged investors to assist and collaborate with African governments in setting up strategic fuel reserves that could last a minimum of 90 days, which was about the globally accepted benchmark for fuel reserves.
“It is a sad scenario that most of the African countries have no strategically held fuel reserves which can last a number of months. They also do not seem to know how to set up robust national fuel reserves without putting pressure on the national treasury for capital expenditure and stock procurement,” Mr. Chikwanda said.
Zambia’s Energy and Water Development Minister, Ms. Dora Siliya and Zambia’s High Commissioner to South Africa attended the two-day conference. The Africa Energy Indaba was also attended by government ministers from other African countries, senior government officials, financiers, investors from other continents, regulators, banks, international media and various other industry players.
Useless
Useless leaders with no Vision, they should be fired as they work to enrich themselves not Zambians. This chikwanda guys is such a fool and very dull. wonder how he would be running Indeni???
THIS IS ONE OF FEW EXCELLENT PRESENTATIONS I HAVE EVER READ ON THE AFRICAN CONTINENT. CRUDE OIL PRODUCERS ARE LIKE COPPER AND OTHER MINERALS PRODUCERS. THEY BOTH PRODUCE AND EXPORT ALL THE RAW MATERIALS OVERSEAS AND IMPORT/BUY BACK, BUT IN DIFFERENT FINISHED AND EXPENSIVE FORMS, THE SAME MATERIALS. TO USE ECL’S SENTENCE (IN FRANCE): WE “EXPORT JOBS”, TO THOSE COUNTRIES LEAVING OURSELVES WITH NO JOBS. THEREFORE, NO GOVT REVENUE. IT’S NOT ROCKET SCIENCE BUT IN THE HEADS OF AFRICAN LEADERS AND TECHNOCRATS, THEY WOULD RATHER EXPORT THE RAW MATERIALS WHICH LEAVE THEM WITH HUGE PERSONAL CUTS/GAINS. NO ONE SEEM TO COME TO THEIR SENSES TO BREAK UP THIS CHAIN. LET’S SELL TO THE WORLD FINISHED PRODUCTS. PERIOD.
U see less !
African governments always move goalposts to justify high costs. Soon, when the oil price improves that itself will be reason to increase prices still further.
”It must be reiterated that fuel pump prices are fundamentally dictated to by a dichotomy of the exchange rate and the spot price on the global market,”
And some opposition Party leader who calls himself an economist thinks when oil prices are low then the pump price must also reduce. What a waste of education!
I feel vindicated. My earlier comments when HH instructed the PF government to reduce the price of oil was as follows: “Politics should be about facts. At $60 a barrel the Kwacha equivalent when 1$= K7 is 60 X 7= K420. At $35 a barrel the Kwacha equivalent when 1$=12 is 12 x 35= K420. So where does price reduction come in? Even in S. Africa there has been no reduction in price for some time now because at $1=R17 the Rand has spiralled out of control and political parties in S. Africa like the DA are blaming Zuma’s ANC. So blame Lungu’s PF if you are not satisfied with the explanation given for the depreciation of the Kwacha for the non reduction in the price of fuel. That is the fact behind the price of fuel”
On a more serious note, I thought the President had curtailed the movement of government officials. It was first the President who went to Rome and Paris, then the Minister of Mines attended the Mining Indaba in S.A. and now the Minister of Energy attending an Energy Indaba in S.A. In this Animal Farm world we live in it is only the hapless junior civil servants who will be affected by the ban.
Tell me something bwana Engineer RTD…If you were in Government and were assigned on one of these trips, would you decline? Give me a honest answer.
All I am saying is that if there is a ban let it affect everybody not junior civil servants only like in Animal Farm where some animals are more equal than others. FTJ at one time said that if civil servants are able to build houses through allowances accrued while travelling why not the President. Let the ban be applied equitably.
When our economy goes bad, it is global economy to blame and there is nothing we can do about it, when the global fuel prices go down, it is the exchange rate to blame there is nothing we can do about, so i think nothing will ever work positive for poor countries
Well done on the great presentations
Hmmmm Shake my head. I believe none of what that said.
This was an excellent presentation. I read about it on the Proceedings of the Indaba. There were other speakers who spoke on similar lines. I just hope that underfive was there and learnt something.
Another part of UPND back bone cracked. More cement pliz
Comment: While appreciating the effect of currency depreciation on oil prices how much tax is collected by govts in developing countries? In Zimbabwe where they use the USD as a settlement currency fuel prices are the highest in the SADC region becoz fuel is heavily taxed. We want a fair analysis of fuel pricing in developing countries please.
We have told you that hh claims to be an economic manager but without specifics of focus of his economic management
We have said that about May 2016, hh will be a shell with nothing to talk about.
under 5
Zambia has its own share of finest brains on the African continent but the country has nothing to show of the value added to the economy. I always hear very brilliant ideas but they have not translated into any tangible scenario.
Could it be that political leaders are afraid of its citizens with bright ideas for fear of losing their grip on political power or are they just busy looting govt coffers ?
Comment: This article is misleading. The author should give us the FOB cost build up of petrol and diesel. The writer should tell us the margins, mark up,taxes and levies. The FOB fuel prices have declined from the time when crude oil prices were $60 per barrel last year to the current $30 per barrel in spite of the depreciation of African currencies. The biggest cost drivers of fuel in African countries is import taxes and local levies.