Oil: Is there a real risk of fuel shortages in Africa?

By Maher Hajbi
Posted on Wednesday, 30 March 2022 10:50

Diesel is available at a service station in Lagos, Nigeria on 14 March 2022. © PIUS UTOMI EKPEI/REUTERS

Between the embargo on Russian crude oil, the volatility of oil prices and the soaring price of a barrel, fuel supply difficulties are raising fears of a dearth on the African continent.

In early March, the outgoing secretary-general of the Organization of Petroleum Exporting Countries (OPEC), Mohammad Barkindo, tried to sound firm and reassuring, saying: “There will be no oil shortage, even if Moscow’s war on Ukraine is fuelling the price surge.”

However, the recent refusal by OPEC and OPEC+ member countries to open the floodgates wider in order to relieve the market is reviving speculation.

Nigeria, the continent’s largest producer of black gold, is paradoxically facing a huge rush for petrol. In recent weeks, motorists have had to show great patience to reach the pump. In Lagos, Abuja and Kano, long queues at service stations are disrupting or even blocking traffic, as the price of diesel has recently risen from N225 ($0.60) to about N800 ($1.93).

Despite its colossal reserves, the oil giant, undermined by the vulnerability of its almost non-existent refining infrastructure, imports 90% of its fuel at world market prices and is severely suffering the consequences of the war in Ukraine.

Domino effect

Since the Russian invasion, the upheavals in the oil market have cast their shadow over African fuel-importing countries. Energy bills have skyrocketed due to the dramatic and volatile increase in crude oil prices, approaching $140 per barrel – not far from the record $147.50/barrel set in 2008.

From Pretoria to Rabat, via Kinshasa, Bamako, Kigali, Conakry or Tunis, citizens are enduring the fluctuation of the black gold market and its repercussions on fuel prices. In the Central African Republic, service stations are running out of fuel and supplies are still not forthcoming.

The West has no short-term alternative to replace imports from Russia.

At this rate, the crisis on the continent is likely to escalate. Kamel Bennaceur, a former Tunisian minister of industry, energy and mines and president of the Society of Petroleum Engineers, worries about the impact of new sanctions against Russia, which provides 11.5% of the world’s supply and is the world’s second-largest exporter of crude oil after Saudi Arabia.

The oil industry expert tells us that a new embargo on Russian energy exports “would create a significant scarcity effect that could push crude prices above $200 a barrel. There will be a global supply hazard, including for African countries.”

Musical chairs

EU countries – heavily dependent on Russian hydrocarbons, but still tightening the screws on Moscow – are currently studying a new list of sanctions and seeking new suppliers.

Thus, the risk of fuel shortages in Africa will evolve closely alongside the situation in Ukraine and the latest decisions made in the West. For the time being, only the US and the UK have decided to do without Russian crude oil.

“The West has no short-term alternative to replace imports from Russia,” says Bennaceur. “The ones it does have are US shale oil, Saudi Arabia, the United Arab Emirates, Iran and Venezuela. All these sources combined would barely make up for the shortage of Russian oil and it would take several months to mobilise them.”

Faced with the risk of shortages, the International Energy Agency (IEA) is advocating restraint and suggests 10 concrete measures to achieve major oil savings – about 2.7 million barrels per day – with a view to avoiding “an energy shock”, which is now inevitable, according to IEA Executive Director Fatih Birol.

“If there are no pleasant surprises, we could see the first global energy shock – oil, natural gas, electricity. If we don’t take urgent measures, we will be faced with [this] shock,” he said on France Info radio on Friday 18 March.

Bennaceur says: “OECD countries’ reserves of refined products are at their lowest level they’ve seen for five years, so it is very unlikely that these players will block Russian exports.”

However, if sanctions escalate, “African oil-importing countries with limited financial resources, notably South Africa, DR Congo, Morocco and Tunisia, will be the most exposed to soaring prices and fuel shortages.”

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options