Africa’s inability to refine its own crude oil is having a serious impact amid soaring global fuel prices [Editor’s Opinion]

Whenever a list of the world’s top 20 largest oil producers is compiled, at least four African countries are mentioned —Nigeria, Libya, Angola and Algeria. But despite producing all that crude, most countries on the continent are still dependent on Europe and the Middle East to meet most of their refined energy needs.

For the longest time, this arrangement has ‘worked’, even as the likes of Nigeria allowed their dysfunctional national refineries to lay in waste.

Fast-forward to 2022, Russia’s war on Ukraine has created what is arguably the worst global energy crisis in recent years. And as energy costs continue to skyrocket, it is noticeably becoming more difficult for many African countries to import the commodity.

In a recent interview with Bloomberg, Fadi Mitri who heads Puma Energy, one of the largest fuel distributors in Africa, said governments across the continent are now faced with two difficult choices —either cap fuel price with legislation or allow market forces determine price.

Going with the first choice would mean risking the possibility of fuel shortages. And the second choice would mean the possibility of further fuel increases, thus posing macroeconomic risks such as worsened inflation.

It is a truly dicey situation. As you should know, the ban on Russian oil and Russia’s response to said ban has resulted in considerable global shortages, especially within the European Union.

Amid these shortages, many EU countries are looking for alternative fuel sources. Interestingly, Middle Eastern countries that used to supply refined petroleum products to Africa are now reportedly shifting focus to European markets with the hope of earning more money. The implication of this, therefore, is that if African countries are unable to meet up with the global pricing demands, they could very well loose the available supply sources. And that, of course, would be disadvantageous.

“There is no doubt that this has a disproportionate impact on the economies of Africa… Do they choose to limit price increases, which will widen fiscal deficits and risk security of supply but limit inflation? Or do they choose rapid price increases which will naturally result in inflation but maintain access to supply on the international market?

“Indian and Middle Eastern refineries that used to supply Sub-Saharan and eastern Africa are today shifting their flows towards unregulated markets in Europe where they can secure more attractive prices,” Mitri told Bloomberg.

Indeed, African leaders will have to make these tough choices now, because richer countries will surely continue to snap up the available supplies for as long as the global fuel shortage last. And nobody knows really how long this would be.

It’s important to note that African leaders might never have been faced with these tough decisions if Africa’s top crude oil producing nations have long built the necessary capacities to refine crude locally.

Business Insider Africa Editor’s Opinion is the viewpoint of an Editor at Business Insider Africa. It does not represent the opinion of the organisation.


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