It has been coming a long time, so long that it almost sounded like the boy who cried wolf. Finally the USA has made a concerted effort to move away from what it considers to be unstable parts of the world for its energy supply. It has started with Africa as according to Bloomberg Businessweek, imports from the continent are down by 90 percent. The report indicates that Nigeria, Angola, Algeria and Libya, Africa’s main oil exporters hardly sell to the US any more. Is that bad?
America’s shale oil boom is rewriting the rules of the energy sector. By the end of the decade the USA expects to be self-sufficient. An energy glut that could potentially last for a century! That spells bad news for African countries that depend almost exclusively on oil as their major export. Not simply because of the loss of the US market, but more so because a new formidable competitor has been created as by the end of the decade it should be pumping out enough oil per day to rival Saudi Arabia who currently produce around 9.5 million barrels per day.
The recent World Economic Forum however, reminds us that some two thirds of the global oil and gas reserves are in the Middle East. Experts believe that whatever way you look at it, the region will remain central to the market for the foreseeable future.
It would also be a mistake for African countries to assume that Asia would make up for the short fall created by the US effectively pulling out of the continent. China for instance, currently gets a third of its oil from Africa. Who would it rather buy from, Africa or the USA? Only time will tell.
The bad news: The one time opportunity to have truly developed the continent by taking advantage of those US petrodollars is coming to an end. It could have a massive negative impact on some African economies. Nigerian crude as an example, provides the revenue for 85 percent of its budget. The good news: with no revenue flooding the country, now is the time to fully diversify the economies and invest in human capital. It is also the time to create an intra African market and a petrochemical industry to serve the needs of the continent.
For the African diaspora, this will spear head an interesting time. The US and undoubtedly European shale boom which is to follow means an era of unprecedented growth and opportunity which they can choose to be part of and further distance themselves from the continent. As for their return to Africa aspirations, the big question to be answered is whether the Africa rising narrative will remain true in a market where African oil may not have the sway it has today and still be an inducement for them to be part of the new era.