Monday, January 28, 2008

Africa's Oil Boom

Today's Financial Times reports on the growing importance of oil production in Africa. Between 2002 and 2006, publicly-traded oil companies tripled their investment in Africa. By 2012, total production on the continent is expected to reach 16 million barrels per day.

As FT points out, however, this massive investment has not helped the development picture in Africa as much as might be expected. High oil prices, a key factor in the investment boom, have seriously damaged the economies of the thirteen African states with no oil resources to develop. In some states with significant production, an absence of refining capacity has meant high fuel import bills have cut into the economic gains from oil exports. Furthermore, government corruption and mismanagement of oil revenues have resulted in many states' failure to achieve export-led economic development.

When one adds to these problems the aggressive positions being taken in Africa by state-run oil companies from China and other Asian states, "one has the recipe for a new scramble for Africa," according to FT.