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

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Religion Aside, Christmas Gains Popularity in Communist Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal 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.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid