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Oil Prices Still a Burden For Developing Economies


Though the price of oil has recently fallen off from record highs, a barrel on the world market still costs three-times as much as it did a few ago. Higher oil prices can be an inconvenience for drivers in wealthy countries, but in the developing world, they can take a toll on already fragile economies. In Burkina Faso, thousands have taken to the streets in recent days to protest the rising cost of living.

At Dakar's intercity taxi station, aging Peugeot station wagons are parked four and five cars deep. Taximen lean against their dusty cars in the late afternoon sun.

Elhadje Mbaye is among them, hoping enough passengers come so he can make the trip to the northern city of Saint Louis. Even if he has a full car, seven passengers, Mbaye says it is still hard to make a profit.

Mbaye says the drivers on his route have raised their prices by $1, to $8 per person. But he says that does not come close to offsetting the price of diesel, which has doubled in the past five years. Mbaye says at most, he might make $30 a round trip. It is not enough money, he says, to cover the repairs to his aging car.

Across the lot, at a stand with cars bound for the nearby city of Thies, Gulgou Mbaye says taximen are in a no-win situation. He says on his route, they have tried to raise fares, but that drove away passengers. At the same time, he is having trouble earning enough money to support himself and his parents.

Frustration among Senegal's taximen has reached new highs in recent months. Drivers in several cities went on strike, hoping to pressure the government to lower pump prices. Even Senegalese who do not drive cabs, or who do not drive at all, are feeling other effects of high oil prices.

In Dakar's northern suburbs streetlights often go dark and private generators rumble. Power cuts happen daily in much of the country. Most of Senegal's electricity is generated by fossil fuels. Last month, the government had to requisition diesel fuel to keep power plants running.

Dakar-based economist Moubarak Lo says the high oil prices have reduced the buying power of Senegal's national electricity provider Senelec. Lo says the spike in oil prices was the last thing Senelec needed.

He says the company had difficulty securing petroleum supplies because it has been late in making payments to many energy providers. Those providers then cut off the flow of petroleum to Senelec. The company also does not have enough production capacity. All of that has meant that the Senegalese people have felt the impact of this oil shock.

But Lo says higher energy prices are already weighing on the country's economy. He says inflation, which had been close to zero for the past five years, is at two percent. Senegal's economy will probably grow just four percent this year, as opposed to between five percent and six percent during the past 10 years.

That growth rate might be the envy of wealthy countries. But according to Moubarak Lo, even slight slowdowns are a big problem for Senegal.

"We have everything to build in this country," he said. "That is why we have higher growth rates than in developed countries. Our population is growing fast, over two percent per year, with lots of unemployed people. About half the active population is unemployed. To create enough jobs we need growth of 10 percent or 12 percent a year. Five percent growth for a poor country is like one percent growth for a developed country."

Senegal's economists and taximen, agree: oil at $60 a barrel is something they cannot afford.