News / Africa

Soaring Oil Prices Could Stun World Economic Growth

Anti-Gaddafi rebels sit on the ground near an oil facility in Ras Lanuf, March 10, 2011. The rebel leadership said on Thursday that the oil port of Ras Lanuf in eastern Libya is under heavy bombardment.
Anti-Gaddafi rebels sit on the ground near an oil facility in Ras Lanuf, March 10, 2011. The rebel leadership said on Thursday that the oil port of Ras Lanuf in eastern Libya is under heavy bombardment.

Multimedia

Audio
Joe DeCapua

The sharp rise in oil prices as a result of political turmoil in North Africa and the Middle East could deal a major blow to global economic growth over the next two years. Developing nations could be hit the hardest.

The increase comes as countries are still recovering from a global recession.

Britain’s Overseas Development Institute (ODI) says there could be an overall one percent decline in GDP, or Gross Domestic Product, which is the value of goods and services produced within a country.  Some African countries could see a much bigger decline, possibly three to four percent.

An overall one percent decline translates into a loss of about $500 billion from the global economy.  The overall sub-Saharan economy could lose $8 billion.

Dirk Willem te Velde, ODI’s head of program at the economic development group, says, “The oil price at the moment is about 40 percent higher than it was on average last year.  So an increase in the price of oil by 40 percent will have quite some implications for the world economy and also developing countries and in particular oil importing countries.”

Some benefit, but many don’t

“An oil price increase,” he says, “may bring some benefits for oil exporters because they get increased revenues, although they need to spend it well.  But of course there are still a lot of oil importers and particularly poorer countries.  Poorer oil importers are still dependent heavily on fuel in their economies and more so than the richer economies, who have become more energy efficient.”

ODI research indicates Ghana, Lesotho, Swaziland, Togo, Honduras, Moldova and Nicaragua could lose more than three percent of their GDP to soaring oil prices.

Willem te Velde says, “The reduction in world GDP is because a higher oil price transfers money from countries with a higher propensity to spend to countries with a lower propensity to spend.”

He adds, “Because oil exporters, the OPEC countries, tend to spend less of their revenues immediately, that means that there’s less spending going into the world economy.  They’ll save more and that will therefore reduce world GDP.”

Are the days of cheap oil over?

“It’s quite difficult to predict exactly what’s going to happen.  Oil prices are notoriously difficult to forecast and I’ve tried to do that in the past and oil prices are extremely volatile.  So, in that sense, it is very difficult to predict.  But there are certain trends that tell us oil prices are likely to stay quite high, particularly in the near future, of course, due to recent conflict and turmoil in the Middle East, but also over the longer term because of the rise in the emerging powers and their demand for oil,” he says.

It’s unclear at this time just how high they may go.

ODI recommendations

There are some things developing countries can do to deal with the economic shocks.

"[The] first one is that countries could become more resilient to shock, so that whenever a shock hits their countries they should be able to react quickly and should be able to change their production structures quickly.  But a second is one that is important at the moment with high oil prices, and it’s also important when we think about climate change… is that those oil importers that suffer most from high oil prices could become less oil dependent,” he says.

Dirk Willem te Velde recommends those countries invest in more energy efficient production methods or use renewable sources of energy, such as wind, solar and tidal wave power.  Tidal power is a form of hydropower based on the tides caused by the gravitational pull of the sun and moon.  Advances in turbine technology could make it more feasible.

You May Like

China Investigates Former Powerful Security Chief

Former security chief and member of Politburo Standing Committee, Zhou Yongkang, under investigation for suspected 'serious disciplinary violation' More

India, US Look to Reset Ties During Kerry Visit

This week's talks will be first high level interaction between two countries since Prime Minister Narendra Modi took charge More

Video Young African Leadership Program Renamed to Honor Mandela

YALI program, launched by President Obama in 2010, aims to build skills in business, entrepreneurship, public management and civic leadership More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid