Can Africa tackle the oil shock from the Iran war? — Counting the Cost

[0:13] Hey there, I'm Scott McLean. [0:14] This is Counting the Cost on Al Jazeera. [0:16] We're looking at the global economic impact [0:19] of the war in the Middle East. [0:20] Oil and gas flows from the Gulf to the rest of the world [0:22] have effectively stopped because of restrictions [0:25] on the Strait of Hormuz. [0:27] Prices have shot up in Africa, [0:29] which imports much of its energy from the Middle East. [0:31] From Ethiopia to South Africa, [0:33] governments are urging people to limit fuel use [0:36] and avoid panic buying. [0:38] Even Africa's largest oil producer, [0:40] that's Nigeria, is feeling the strain. [0:42] Petrol prices there have risen by 50%. [0:45] Its largest refinery is ramping up production. [0:48] Industry analysts say other African producers, [0:51] like Angola, will benefit from higher crude prices [0:53] in the short term. [0:55] But the continent's oil and gas industry [0:56] has suffered from years of underinvestment. [1:00] So what are Africa's options to secure its energy needs? [1:09] Well, the war in Iran has created an energy shock in Africa. [1:12] The continent relies heavily on oil and gas imports [1:15] from the Middle East. [1:16] Much of that is currently stuck [1:18] on Africa's oil and gas industry. [1:18] Africa's oil and gas industry is on tankers [1:19] near the Strait of Hormuz, [1:20] which is effectively closed. [1:22] Countries including Kenya, Ethiopia, and Zambia [1:25] are reporting shortages. [1:27] Others, like Namibia, are cutting fuel levies [1:29] to offset soaring prices. [1:31] Africa's largest oil refinery in Nigeria [1:33] is pumping out crude at maximum capacity. [1:36] That's 650,000 barrels every single day. [1:40] And still, it is nowhere near enough [1:42] to meet the continent's needs. [1:44] And Africa's energy infrastructure [1:46] needs money to modernize. [1:47] So, what are Africa's options to secure its energy needs? [1:47] So, what are Africa's options to secure its energy needs? [1:47] So, what are Africa's options to secure its energy needs? [1:47] So, what are Africa's options to secure its energy needs? [1:47] So, what are Africa's options to secure its energy needs? [1:47] So, what choices do governments have [1:49] to contain the crisis? [1:51] We have a panel of guests to discuss all of this [1:53] in a moment, but first, this report by Laura Hahn. [1:57] Lights are dimmed and businesses shuttered early in Cairo, [2:01] a city that rarely sleeps. [2:05] Vital oil and gas supplies being cut off [2:07] more than 2,000 kilometers east in the Strait of Hormuz [2:11] is forcing the government into taking exceptional measures, [2:15] including hiking fuel prices [2:17] and switching off the lights. [2:19] in the Strait of Hormuz. [2:20] and switching off the lights. [2:20] and switching off the lights. [2:22] The decision affected sales by 60 percent [2:24] The decision affected sales by 60 percent [2:24] because we were used to working at night. [2:25] because we were used to working at night. [2:26] But now, when a customer comes at nine, [2:28] the decision affected sales by 60 percent [2:28] we would be closing. [2:30] we would be closing. [2:30] we would be closing. Middle East energy shocks [2:32] Middle East energy shocks [2:32] are now rippling across Africa. [2:34] are now rippling across Africa. [2:34] This is Lagos in Nigeria, [2:36] another city plunged into darkness [2:39] after petrol prices jumped by 50 percent in a month. [2:44] That's despite being home to Africa's largest [2:46] petroleum refinery, Dengote, [2:48] which has raised its ex-depot price by about 60 percent. [2:48] which has raised its ex-depot price by about 60 percent. [2:51] 61% in one month. That's because Nigeria has been largely dependent on imported fuel as [2:58] it lacks refinery capacity and strategic reserves. [3:02] I understand that the refinery, the refinery isn't getting sufficient volumes of crude [3:08] here. So they need to also import crude and that then means it adds to the cost. You know, [3:14] those costs we are avoiding by locally refining. You still have to pay them if you have to [3:20] bring in the crude they are going to refine. [3:24] In South Africa, the continent's most industrialized economy, authorities are warning of supply [3:29] disruptions and panic buying. [3:32] We are experiencing a lot of shortage from fuel. We only have 93 left. There is no 95 [3:39] fuel for petrol. There is also no V-power diesel in here. See, so it's so many difficulties [3:46] here, you guys. [3:48] South Africa's Central Energy Fund estimates that petrol prices [3:52] would be higher in the future. [3:52] Petrol prices would need to jump 30 percent and wholesale diesel more than 50 percent [3:57] to make up for the shortfall of fuel at the pumps. To offset this, the government is slashing [4:02] petrol levies in April. [4:04] It's too basic. In terms of, because if the petrol goes up, it means everything is going [4:12] up and the only person who will be suffering is us, the consumers. [4:18] And to cushion the blow of energy shocks, African nations are taking action. Namibia [4:23] is slashing [4:24] fuel levies, while Tanzania is strengthening border controls to prevent fuel smuggling. [4:30] And Kenya says it will stabilize prices with a fixed tax levy. [4:35] But businesses and the general public are already feeling the pinch across the continent. [4:42] Nigeria is a huge market for app-based taxi drivers. They say oil price hikes coupled [4:48] with low fares and high commissions are leaving them shortchanged, all exposing just how quickly [4:55] the war in Iran is translating into fragile energy systems and economic pain across Africa. [5:02] Lor Khan for Counting the Costs, Al Jazeera. [5:06] All right, let's dive deeper into this. Joining us now from Dakar is Lena Sen. She's an economist [5:12] and president of DCA, Developing Capital for Africa. That's an investment advisory firm. [5:18] Joining us from London is Gavin Thompson. He is the vice chairman for energy in Europe, [5:22] Middle East and Africa at Wood Mackenzie, a global energy research group. And also, he's [5:26] also in London, is Veronica Bolton-Smith. She is the founder and CEO of the Critical [5:30] Minerals Africa Group and an investment and trade advisor to African governments. [5:35] Lena, let's start with you. We're focused on Africa today. Obviously, it is a diverse [5:39] continent. Everybody is going to feel the impacts of this a little bit differently. [5:43] But on the one hand, you have countries like, say, Algeria, Libya, Nigeria and Angola. These [5:48] are oil-producing countries. You also have countries that are almost entirely dependent [5:52] on imports. [5:54] So can we sort of divide Africa into which countries are most dependent on imports? [5:55] So can we sort of divide Africa into which countries are most dependent on imports? [5:56] So can we sort of divide Africa into which countries are most dependent on imports? [5:57] And can we sort of divide Africa into which countries are most dependent on imports? [5:58] And can we sort of divide Africa into which countries are most dependent on imports? [5:59] Is it really just a case of winners and losers, or is everybody ultimately going to feel [6:03] this? [6:04] Thank you so much for having me. [6:05] I think what we're observing across the continent right now is a real pain that oil-producing [6:16] countries and non-oil-producing countries are victim of. [6:22] So what's happening is even a country like Senegal, which just started producing oil [6:30] in 2024, is going to feel a lot of goings-on. [6:32] it's still early in the stage of uh production to be able to benefit from it but what we're seeing [6:39] right now is uh across the board not not just oil producing countries the pain is felt across [6:46] the board okay and this is where i think yeah this is where uh what's very important uh country like [6:55] senegal the president uh jamaica said we need to focus on fiscal discipline and try to reduce [7:05] as much as possible uh government expenses yeah so i want to talk about the solutions in a moment [7:10] but first i just want to sort of identify the big picture problem here and gavin you're the [7:14] energy guy so the international energy agency according to them africa produces eight percent [7:20] of the world's crude oil but only refines two percent of it so help us explain where the [7:24] disconnect is between oil production and oil production in the united states [7:26] and refining capacity yeah it's really as simple as that there is a lack of domestic refining [7:35] capacity across the continent in in your report you mentioned um nigeria producing around 650 000 [7:42] barrels a day from the dangote refinery you know that's a fraction of africa's requirements for [7:48] refined products that are really key to the economic activity across the continent [7:53] products like diesel for transportation which is essential to [7:57] ensure robust supply chains food security and so forth so whilst africa is producing [8:04] in excess of 7 million barrels a day of crude oil not not uniformly across the continent a [8:10] number of big producers much of that is exported and then even those big producers [8:16] will be reliant on imported refined products so you get an imbalance between the domestic [8:22] production profile and the import profile of refined products so given that nigeria has that [8:28] dangote refinery given that it places restrictions on exports are you surprised that they are still [8:33] seeing inside of nigeria a 50 rise in the price of petrol at the pump no not not surprised um nigeria [8:44] is the big oil producer in africa but it's still only one country of more than 50. um and so you [8:50] know i think if we look at the continent as a whole you see a real serious issue around um supply [8:59] chains and import dependency and as prices ramp up that feeds through to the pump and to consumers [9:06] and these very price sensitive consumers secondly it's not just about higher prices it's actually [9:11] about the availability of refined products because the market globally is much tighter [9:17] now african countries are competing globally uh for a more limited um supply of refined oil products [9:25] and price wins out in these situations and so it's not only [9:30] going to try to meet its needs. It's competing with Europe, with Asia and other parts of the [9:34] world. And that's creating a real tightness in the supply and inevitably knocking through into [9:40] higher prices for consumers. Yeah, of course, without protectionist measures, you're sort of [9:44] at the whims of the global market, which is setting the prices here. Veronica, let's talk [9:48] about the solution. So you're seeing countries like South Africa, say, removing fuel taxes to [9:53] try to make things a bit more affordable for people. You're seeing countries like Egypt, [9:57] for instance, putting curfews on on businesses. You advise governments. I wonder if you were [10:04] advising a government in Africa today, what would you tell them that they should be doing right now [10:09] to try to make things easier for people? What an excellent question. And also, thank you for [10:15] having me. Ultimately, it comes down to mitigating risks. And I think Africa has, you know, what this [10:23] crisis is showing us is just how vulnerable it is to, you know, its global [10:28] situation. And I think Africa has, you know, what this crisis is showing us is just how vulnerable [10:28] it is to, you know, its global situation. And I think Africa has, you know, what this crisis is [10:28] is just how vulnerable it is to, you know, its global situation. And I think Africa has, you know, [10:28] supply chain and Africa's position in that. I think one of the things that we advise as the [10:33] Critical Minerals Africa Group is to ensure that Africa really has cheap, reliable power. [10:38] It's investing in its transmission and distribution and the grid to enable, you know, off grid [10:44] solutions also to add to the grid itself for manufacturing, for processing. It also needs to [10:51] invest in its infrastructure. I mean, things like travel roads will be highly impacted by what's [10:58] happening here. Obviously, fuel prices will be going up. So moving goods across Africa will be [11:04] challenging, but even more so because the infrastructure is so poor. So investing in that [11:09] kind of long term, you know, the fundamentals, as we call it, in water infrastructure and [11:14] infrastructure itself and in the energy infrastructure will be very vital for the [11:18] future. And I think as well, we need to make sure that we're investing in people, the skills [11:22] that the continent really requires to ensure that we can create those markets within Africa [11:28] as well. So, yes, we want to export out, but we also want to make sure that we're trading [11:33] internally. So to strengthen those kind of cross border opportunities and strengthen the [11:38] opportunities to trade with one another and to have that kind of regional approach when thinking [11:44] about how to create value chains. So when advising governments, we look at sort of the whole picture. [11:50] Energy plays a key role in that. [11:52] But I mean, these are all long term solutions to the problem. But I wonder, just to make things [11:57] easier today, [11:58] I mean, is there really a good answer to this question as to what governments can do beyond [12:04] just telling people, hey, try to reduce your fuel consumption if you can? [12:07] I think, yeah, it's a good question. Short term sort of [12:14] opportunities will really come down to whether governments are able to attract investment. [12:19] And I think that is a short, medium and a long term play. Short term, it needs to think about [12:24] where it plays a role in supporting other countries, neighbouring countries, [12:29] increasing that kind of intra trade, as I've mentioned already, and I think also just [12:35] strengthening its economic power by looking at opportunities to support growth of economic, [12:43] sorry, economic growth across regions, economic growth across the continent as well. So yeah, [12:48] I think in the short term it's about making sure that you can create value [12:52] nearer to home as well as looking at how to do that abroad. [12:55] Leonard, these kind of business curfews that we're seeing in Egypt, [12:59] you know, removing taxes on fuel, which some countries are doing in Africa, [13:03] are these bandaid solutions or can these be in place for a longer period of time, you think? [13:07] I think this situation really shows the vulnerability of our economies. [13:18] We depend too much on external factors that we cannot control. So I think what she said [13:28] is very much on point. [13:32] I think that the economies on the continent need to rely on, find solutions to rely on themselves [13:41] together. So I think regional integration is extremely important. We cannot continue to [13:50] be dependent on external sources and the strength can be found on the ground. We have the resources, [14:01] we have the human resources, we have [14:03] the natural resources, but we just need to have a better cohesion and organization [14:11] in order to avoid being in this trap of global chunks. [14:19] Yeah, Lena, I wonder if you can give me a little bit of context on the human [14:22] impact here. According to the UN, some 600 million people, that is almost half the population [14:28] of the entire continent of Africa, lack reliable access to electricity and yet they are still not. [14:34] They are still somehow feeling the impact of these rising fuel prices. What do you think the [14:40] impact will be on Africa's poorest citizens? [14:45] Well, I'm going to be just very specific. Take agriculture as a sector, which is a huge sector, [14:53] obviously extremely important. According to the World Bank, April 2026 food security update, [15:02] the global euro price surged 46% [15:06] month on month between February and March. So that tells you how catastrophic it is for our farmers [15:18] to deal with this crisis. And 45 million people, that's according to the World Food Program, [15:31] 45 million people can be pushed into acute hunger by mid-2026. [15:37] Yeah. [15:38] These are numbers, these are facts. [15:40] Yeah, obviously a huge concern. I want to show our viewers a graphic from the International [15:46] Energy Agency, which illustrates the point that it seems all of you are trying to make and the [15:50] difficulty that Africa is really facing. So if you go back to the year 2000, Africa was a net exporter [15:57] of oil. Fast forward almost a quarter century later, exports have dropped 12%, imports have [16:03] surged more than 300%. So Gavin, I wonder, in your view, [16:08] why has this happened? And was there something that African governments [16:12] could or ought to have done to prevent it? [16:14] Well, it's a real challenge. I think that when you look at [16:21] Africa and African oil and gas reserves, so both proven and yet to be discovered. [16:31] We see Africa, of course, it's a major hydrocarbon producer. It has world-class [16:35] discovered oil and gas resources and probably more to come. Attracting the capital, [16:39] and creating the appropriate regulatory and fiscal environments to stimulate investment in that [16:47] has been a real challenge. It's been a challenge for decades. We are seeing governments making [16:51] progress. Nigeria's production is ramping up and it has set targets for two million barrels a day [16:58] of production by 2027, three million barrels a day by 2030. You mentioned Angola. Generally [17:05] speaking, the country has incentives for incremental production and development of [17:10] marginal fields. But these increases take time. They're not going to be a response to this current [17:17] crisis. What they may do is they may accelerate action by governments and regulators to ensure [17:24] that African producers like Nigeria and Angola and others remain super competitive in the global [17:34] upstream industry. [17:35] But that's not going to happen. [17:35] That's not going to happen. [17:35] That takes time. It takes months and years to see that come through. So we're not going to see some immediate [17:41] resolution to this current crisis through domestic production. [17:45] Gavin, I just want to ask you quickly about South Africa, if we can focus in on that country for a minute. [17:48] So they have had a number of oil refineries actually decommissioned or mothballed in recent years. [17:54] Is it realistic to maybe restart those refineries in South Africa or is it not going to make a difference [18:00] because they still rely on crude oil imports from elsewhere to actually, [18:05] you know, [18:06] supply those refineries? [18:09] Yeah, I think it's exactly that. You know, the real challenge is crude at the moment in the market, the availability of that crude, the price of that crude and taking a decommissioned refinery and bringing it back into production. Again, this is not a quick process. There's the engineering, there's the safety, there's the resourcing, human resource to bring that online as well as supply chains. I think it may lead governments to reassess their energy security. [18:37] So they're broader energy security. How do they respond to supply shocks in the future? But I don't see that as a short-term solution to the current crisis. [18:50] Yeah, Veronica, you talked about lack of investment and perhaps a good case in point here is Ethiopia, which relies almost entirely on energy imports from abroad. Obviously, it is having a ripple effect throughout the entire economy. There are some oil and gas reserves in Ethiopia, clearly, though, not entirely. [19:07] Not enough. Do you think that Ethiopia or the government there should have been more prepared? Do you think that it was reasonable for them to expect that a historically pretty stable region like the Gulf would always be there for them? [19:20] Yeah, it's a good question. I think it's not just Ethiopia. I think the continent wide, the mitigation of potential risks hasn't been really well thought out. I think we're seeing that play currently now when we think about that, as I mentioned, the energy infrastructure. [19:39] We haven't invested very well in transmission and distribution lines. We haven't invested in infrastructure of people skills. You know, there's so much there that, you know, Africa needs to use this opportunity. It's a crossroads. So I think it needs to think about, you know, going forward. We saw this definitely with COVID, you know, the impact that COVID had on global supply chains, but how it impacted Africa significantly. [20:05] And so I think it's not just about kind of a short-term solution. It's a good question. [20:09] I think it's a short-term fix and thinking how can we weather the storm on this occasion, but long-term, how can we play a role in terms of attracting investors amidst this global crisis? [20:18] And how do we strengthen Africa's position as a serious player in terms of utilising the natural resources that it has, investing in sovereign wealth funds to then reinvest back into infrastructure and everything else, and so that we're not subject to, you know, these crises really happening. [20:39] So I think it's about using this as an opportunity to learn and to grow and to change the way that we are currently doing things. You know, I think Ethiopia can't be blamed for that. A lot of us have been foul of that on the continent, but it's how we use it now and thinking about that sort of 20, 30-year vision where we want to see Africa playing a role. [21:02] So, Lena, it is not just the Gulf, obviously, that is producing oil, but you also have Iranian oil. [21:09] In this situation, obviously, U.S. sanctions and the threat of blowback from the United States has prevented a lot of African economies from buying Iranian oil. [21:19] Do you think that more countries may look at the situation and say, look, this is our best option? [21:24] Do you think that some will opt to buy Iranian oil regardless of the blowback from the United States? [21:29] I think the situation we're living right now is really historic. [21:39] I think we now understand. [21:42] I think we now understand that we're all vulnerable to one another, and I think right now Africa has the perfect opportunity to attract more investments because everyone believed in the stability of the Gulf countries for the longest time, and now we understand that they have their own vulnerability. [22:14] Who thought that Dubai or Doha would be in this position today? [22:23] So I think right now I believe that the African countries need to take action and position themselves as a destination for international investors. [22:39] I think Iran is a country that has shown its resilience. [22:45] I think that the United States. [22:47] Has shown its vulnerability. [22:51] And I think we need to take act of what is happening and make decisions that will allow us to benefit as much as possible for our people. [23:08] Yeah. And I certainly hear the message that all of you are trying to convey that Africa desperately needs further investment in its industry. [23:14] But Gavin, I wonder, short term, which countries, if any, are going to be able to do that? [23:19] Which countries, if any, in Africa, do you think are likely to be tempted to maybe go and buy oil from Iran? [23:26] It's a very difficult question to answer. [23:29] That would be very likely to be government-to-government discussions. [23:34] The question may be how much spare Iranian supply is available. [23:39] China is by far the largest buyer of Iranian crude. [23:44] And so you would be competing for a more limited amount. [23:51] Of volume. [23:51] But I'm not party to those conversations, those government-to-government conversations. [23:55] So it would be only be able to speculate. [23:57] What about Russian oil, though? [23:59] Obviously, there have been sanctions from the West placed on Russian oil. [24:04] Do you think that Africa will be a bigger buyer of Russian petroleum given the situation? [24:11] And will that sort of deepen their influence on the continent? [24:16] No, I think we've certainly seen from the White House that there has been a. [24:23] Dispensational. [24:23] Desire to minimize the upside in oil prices that that's a that's a political position which the US government takes. [24:34] It doesn't want US consumers exposed to high gasoline prices. [24:39] And in parallel with that, we've seen various measures announced that have allowed more Russian crude exports into the market. [24:49] And so that has been quite a public position that most of that. [24:53] Has, as we know, has been going to to India and China. [24:59] But if more is available and African buyers are interested in that, then I wouldn't be surprised if some Russian volumes go into Africa. [25:12] But this might be a short term measure. [25:13] So I don't know if I've necessarily draw the line between Russian influence in Africa and the short term supply of Russian crude. [25:21] Certainly a fair point. [25:21] Veronica, let me ask you about the oil. [25:23] Producing countries in Africa, Angola, Nigeria, Libya, Algeria are the biggest ones. [25:29] Is for them is now the time to sort of cash in on the rising price of oil and gas? [25:35] Or is now the time to actually restrict what goes outside their borders to make sure that their own citizens have enough and don't have to deal with these rising prices? [25:45] Yeah, I think it's a bit of both. [25:47] I think ultimately what we want to see is for those countries, like you mentioned, Angola, et cetera, who are, you know, seeing an. [25:55] An increase in sales and use that money to then reinvest back into the country, i.e. [26:02] subsidies. I think it's important to recognise that, you know, the cost, the average cost of food, of fuel, et cetera, for the for the average person is going to go up significantly. [26:14] So any ways that government can help reduce those costs for the consumer will be, I think, will be felt well and received well. [26:22] I think also, you know, there is. [26:25] There are opportunities to also look at how, you know, you can create sovereign wealth funds. [26:31] So investing in those things, as I've mentioned already, to invest in those infrastructure and energy opportunities. [26:37] But I think, yeah, in the short term, medium term, it would be good if these countries could then reinvest and also look at how they can bring costs down for the consumer. [26:46] All right. Veronica Bolton-Smith, Gavin Thompson and Lena Sen. [26:50] It's a fascinating discussion. Thank you so much, all of you, all of you for your time today. [26:55] I really appreciate it. [26:56] Thank you. [26:59] And that's our show for this week. [27:00] You can get in touch with us on X. [27:01] My handle is at Scott McLean and make sure to use the hashtag AJCTC when you do or drop us an email. [27:08] Counting the cost at Al Jazeera dot net is our address, but there's more for you online at Al Jazeera dot com slash CTC. [27:15] That'll take you straight to our page, which has individual reports, links and entire episodes for you to catch up on. [27:22] That's it for this edition of Counting the Cost. [27:24] I'm Scott McLean and from the whole team here in Doha. [27:26] Thanks for joining us. [27:27] The news is next year on Al Jazeera.