Oil Sands Truth: Shut Down the Tar Sands

Africa Faces Another Rising Expense: Fuel

Africa Faces Another Rising Expense: Fuel
July 12, 2008

DAKAR, Senegal — In the United States, where the median household
income is about $48,000, $4-a-gallon gas is painful.

In Nigeria, most of whose 140 million citizens live on less than $2 a
day despite their country's status as the world's eighth largest oil
exporter, $5.50-a-gallon diesel is excruciating.

Daniel Idoko runs a small business center in Abuja, Nigeria's capital,
and because the country's electricity supply is so balky, he relies on
a diesel generator to run his computers, fax machines and copiers. The
price of diesel has increased by 110 percent in the past few months,
transforming his once prosperous small business from an asset to a

"I employ six people and pay rent for this shop, salaries, and I
maintain equipment," Mr. Idoko said Friday, with a mix of frustration
and resignation. "How much do I have to make to break even?"

Rising global food prices have sent discontent rippling across Africa
in recent months, prompting riots and demonstrations from Zambia to
Senegal, Tanzania to Niger. Now fuel prices are causing rumblings as
well. On Friday, fuel tanker drivers in Nigeria, Africa's most
populous nation, went on strike over rising prices of diesel fuel and
poor road conditions, a move that could cripple the economy.

In Africa, fuel prices are a much less emotional issue than food
prices. Food takes up 50 percent or more of a household's budget, but
since most people do not have cars, the price of gas is meaningful
only as it relates to bus and taxi fares.

But now those are rising rapidly, too. In Namibia this week, bus and
taxi drivers increased fares by 10 percent after the country's sixth
fuel price increase this year. In Senegal, a ride in a private minibus
that once cost 50 cents can now cost double that.

Fuel prices are also eroding the profits of businesses across Africa —
where a single breadwinner sometimes supports a dozen people or more —
hurting some of the neediest people in the world. Prices have risen so
fast that they threaten to undermine the continent's nascent economic
boom, which has been driven in large part by high prices for the
natural resources that many countries export.

Benedicte Christensen, acting director of the International Monetary
Fund's Africa department, told reporters earlier this month that price
shocks had raised import costs across Africa, undermining growth.

In Senegal, where power generation is largely dependent on diesel, the
state-run electrical company has struggled to provide continuous power
to large swaths of the country. Oumar Ba, a tailor who shares a large
workshop with dozens of others here in Dakar, said the electricity was
usually off half the day, cutting deeply into his income.

"It is very hard to work like this," Mr. Ba said. "But I have people
in the village depending on me, so I try to keep going."

Countries that set national fuel prices, facing huge import expenses,
have had to raise prices. Burundi, a tiny, impoverished nation that
has suffered through civil war and mass killings, just raised its
prices by 8 percent. Ivory Coast, a onetime regional economic
powerhouse also struggling to recover from civil war, raised its fuel
prices this week to more than $7 a gallon.

In Nigeria, where corruption and misrule have squandered, by some
estimates, as much as $400 billion in oil profits over the past 40
years, cheap gas is nothing less than a birthright. But Nigeria's
dilapidated refineries cannot produce enough gasoline to supply the
country. The government imports about $4 billion a year of petroleum
products. Government subsidies have kept regular gasoline selling for
about $2 a gallon, but the price of diesel, crucial for businesses and
heavy transport, has rapidly risen.

"The cost of diesel is too much so we can't even use the generators
any more," said Dennis Mbang, 35, a pharmacist in a military hospital
in Lagos. "The common man doesn't feel fine. The wealth is here, oil
is here, but the masses are suffering."

High fuel costs are a particularly bitter pill for Nigeria because its
own troubles have helped raise prices. Attacks on oil installations by
militants in the oil-rich Niger Delta region have helped briefly to
knock Nigeria out of its spot as Africa's top oil producer, in favor
of Angola.

The International Monetary Fund's recent analysis of the effects of
rising oil and food prices warned that at least 18 countries in Africa
would be pushed to the tipping point by high fuel prices.

"It is a potential source of instability, particularly when you
combine the galloping price of petrol with food prices," said Philippe
de Pontet, an analyst with the Eurasia Group, a political risk
analysis consulting firm.

In Liberia, one of the world's poorest countries after 14 years of
civil war, price increases for oil and food would consume almost all
of the country's foreign reserves. Higher oil prices will cost Ghana,
which has one of West Africa's most promising economies, 8.1 percent
of its gross domestic product, according to the monetary fund.
Will Connors contributed reporting from Lagos, Nigeria, and John
Alechenu contributed reporting from Abuja, Nigeria.

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