Africa’s oil economies must look into the future with less dependence on oil export revenues as the world transitions from fossil fuel consumption to renewable and sustainable energy sources in an effort to join the ever-expanding global green and clean energy movement.
In the foreseeable future, economies that are totally dependent on oil, natural gas and coal for export revenues will face massive export revenue shortfalls in the next 20 years ($1 trillion) unless they find alternative export commodities in other sectors or invests in renewable energy sectors such as wind, solar, thermal, lithium-ion batteries, biomass and so on.
This is according to top global accounting firm PricewaterhouseCoopers (PWC) that suggests in its Africa Oil and Gas Report 2020 that African oil economies must take immediate steps to forestall the economic consequences of the global decline in fossil fuel consumption.
Such a necessary transition from fossil fuels to green and clean energy is not only the most environmentally sustainable way for the future of global industry and commerce, it is also the most economically viable option for those countries that are totally dependent on oil exports to finance national budgets.
If PWC’s calculation is anything to go by, Africa’s oil economies will have to collectively generate 1 trillion dollars from alternative economic activities other than fossil fuels or petroleum products.
This calls for economic diversification for countries like Nigeria, Angola, Algeria, Libya, and Egypt that are among five of the top 30 oil-producing countries in the world, accounting for more than 7.9 million barrels per day in 2019, which is about 9.6% of world output.
Between 2005 -2010, African oil production was about 10 million barrels per day but between 2010-2015, African oil production declined due to lowering global market prices.
In 2020, oil prices took a nose-dive due to the onset of the global Covid-19 public health pandemic coupled with a production dispute between Saudi Arabia and Russia. This has brought high uncertainty to future levels of oil production in Africa and elsewhere.
With many countries around the globe joining the green and clean energy revolution, global demand for fossil fuels will continue to fall. Naturally, this falling demand will lead to falling prices and revenues.
Clean and Cheap Energy
Africa’s renewable energy sources are in abundance. It is a tropical continent with high degree of sunlight all year round. If Africa were to invest massively in the solar energy sector, the continent could become energy self-sufficient and a net exporter of renewable energy in the future.
According to the International Renewable Energy Agency (IRENA), the costs of solar power production have dropped by nearly 75% since 2010 and other renewable sources like wind, geothermal and biomass have been shown to be cheaper and cleaner than power generated from fossil fuels.
Most automobile manufacturers are transitioning from locomotive and thermal engines to electric engines with many countries and cities already passing laws to ban fossil fuel powered engines in the next few years.
The Green New Deal (GND) in the US congress may become the first major green energy policy of the industrial world and signals the world’s gradual transition from fossil fuels to renewable energy.
The Green New Deal advocates for “rapid and far-reaching transitions in energy, land, urban and infrastructure and industrial systems …unprecedented in terms of scale”.
In an attempt to meet this challenge within the US, radical left Congresswoman Alexandria Ocasio-Cortez and Senator Ed Markey introduced the Green New Deal resolution that elicited a huge global reaction and chiefly aims to ‘’radically decarbonize the US economy’’.
In other words, the GND aims at transitioning the world’s biggest economy from fossil fuels to renewable energy.
The United States of America is a top petroleum exporter (8.47 MMb/d of petroleum) to 190 countries globally. The country is also a top importer of petroleum amounting to 9.14 million barrels per day (MMb/d) from about 90 different countries.
The imported petroleum products are crude oil, hydrocarbon gas liquids, refined petroleum products such as gasoline and diesel fuel, and biofuels (including ethanol and biodiesel).
This is why the US signal towards GND is significant for African oil economies solely dependent on oil export revenues.
Non-Oil Sector Investment
With an uncertain future for oil economies in Africa and globally, nations are working on different versions of their own Green New Deals to provided alternative energy for their people, create new sustainable jobs and newer sources of export revenues for their economies.
This is a signal to the gradual demise of the fossil fuel economy.
Africa’s renewable natural sources such as solar, wind, geothermal and biomass must be fully pursued.
Most importantly, threats of collapse of the monolithic oil economy necessitates that Africa focuses on its non-oil sectors such as Agriculture, telecommunication services, financial sector (banking and insurance) services, tourism service (hotels, restaurants, parks, carnivals, globally branded cultural festivals, movies; Health services; export trade, mineral and mining activities, Manufacturing; environmental services (cleaning, waste collection and recycling); R&D activities as well as ICT and innovation.
For example, a non-oil economy like India is focused on ICT goods and services. In 2019 alone, India’s ICT Goods exports were valued at 6,477,915.772 USD. Africa can definitely take a cue here.
It has become common to hear people say that the future is African as 53% of the global population will be Africans by 2030.
Africa also has the youngest population of ICT savvy millennials to help Africa diversify its economies to embrace the challenges that face fossil fuel economies of the future.