OPEC from the African Perspective

Global attention in the first week of October has primarily been focused on the decision made by an expanded group of the Organization of the Petroleum Exporting Countries (OPEC+), consisting of several of the biggest oil producing countries, to cut oil production by two million barrels a day for the purpose of stabilizing the oil market. This decision sent shockwaves throughout the world, as this will likely raise energy prices, worsening the ongoing energy crisis due to the Russia-Ukraine War. With this recent OPEC+ decision, eyes have been on the Middle East, especially Saudi Arabia, as some of these Middle Eastern countries are the biggest oil producing and oil reliant OPEC+ members. However, it is important to look at not only the Middle East and Russia when it comes to OPEC+, but also Africa, which currently produces approximately ten percent of the world’s oil production, with major potential for growth in the next twenty years as demand for African oil significantly rises and untouched oil reserves unleash major possibilities for African oil. Africa produced 125.3 billion barrels of crude oil in 2021, and has seven members in OPEC, which is more members than in the Middle East. 

The two biggest oil producers among the African members of OPEC are Angola and Nigeria, with Libya often following close behind and frequently in the top two in past years. Other major oil producers in Africa are Egypt, Ghana, and Chad. There are also other oil and gas companies in Africa besides OPEC, such as the African Petroleum Producers Organization, in addition to other small oil companies specific to an individual state, such as Angola’s National Agency for Petroleum, as the current lead individual state petroleum company. The African Energy Commission also plays a role in oil and gas production in Africa. These various African oil companies, in addition to OPEC, demonstrate how much oil potential there is in Africa and how the future for oil exporting in Africa looks very strong as pressure in the African oil sector is increasing, competing with other major oil powers. 

African countries have played a big role in OPEC for many years, with 11 out of the 29 Secretary Generals of OPEC coming from African countries. The second most recent Secretary General of OPEC, Mohammed Barkindo, was from Nigeria, and was a major player in the historic Declaration of Cooperation between OPEC and non-OPEC countries. This declaration significantly helped to stabilize the global oil market, and was very successful in doing so with the recent economic crises that have plagued the globe, such as the COVID-19 pandemic and the ongoing energy crisis. African countries also had a major role in the Algiers Accord, which took place in Algiers, Algeria, leading to the Declaration of Cooperation and the Vienna Agreement, another major OPEC decision that came in 2017. 

Right after the decision to cut oil production was released by OPEC, the African Oil Week Conference was held in Cape Town, South Africa, where delegates from many African oil producing and exporting countries expressed mixed opinions on the OPEC decision. Some delegates expressed concern over the rising prices of oil that will undoubtedly come from this massive oil cut, with the concern mainly coming from countries that have to import oil rather than export. Other delegates, such as the Executive Director for the African Energy Commission, Rashid Ali Abdallah, and the Vice President of Angola’s National Agency for Petroleum, Natacha Massano, both expressed that they are currently unsure of the vastness of the effects of OPEC’s decision, but did not downplay the possibility of many countries being negatively affected by the higher oil prices. 

The main positive outlook on the OPEC decision came from Omar Farouk Ibrahim, the Secretary-General of the African Petroleum Producers Organization. Ibrahim expressed support for the decision, as he believes that the countries who made the decision did it to save the industry and in the interest of their own people. At the conference, Abdallah of the African Energy Commission stated that he “hope[s] the price is not shooting up, because in Africa we depend on oil products in power generation.” This raises an interesting issue that is currently being debated: will this have a positive or negative effect on African countries? 

One side of this argument is that this oil production cut will help stabilize the oil market, which would benefit African countries, especially those who are deeply invested in oil. However, another side to this is one that Abdallah points out in his statement from the conference. Many African countries depend on oil, and while this might stabilize oil markets, there are several African countries who could be drastically affected by the rise in oil prices in the short term. This brings up another issue in African economics, specifically related to oil: the resource curse. 

The resource curse describes how countries with a plethora of natural resources, including oil, tend to have volatile economic markets that rely on just the production of one good. There are several potential causes for this resource curse, including undiversified markets, autocratic institutions and governance, and external factors from market trends. While some are reluctant to accept this theory due to counterexamples, the natural resource curse appears to be valid when describing the case of African oil countries. Angola, for example, the current highest oil producer in Africa, ranked 149 out of 186 on the poverty scale in 2016, and two thirds of Angola’s population live on less than two dollars a day. While OPEC oil ministers have defended their decision by citing the energy poverty issue in places such as Africa, with rising oil prices and cutting oil production, the resource curse is something to pay attention to when looking at African countries. 
The African continent’s oil producers, exporters, and importers should remain under close watch in the coming months to see how OPEC’s decision will affect oil markets in Africa, and to observe first hand the resource curse, and if OPEC’s decision will bring about positive or negative effects in African countries suffering from poverty. While some African countries, such as Botswana, have been able to beat the resource curse, none of the major African oil producers have had such success. As oil production is currently slashed, African OPEC leaders should look to strategies of diversification, ownership of funds, transparency, and improved governance to keep the citizens of African oil countries from paying the highest price as a result of OPEC’s production cuts.

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