By Alex Chiejina (With Agency Report)
Brent crude prices rose to a four-month high on Monday as a rally in wider commodities markets encouraged buying ahead of a meeting of oil producers in Doha next Sunday. The meeting is aimed at freezing current output levels.
Brent crude futures, the global benchmark, were up 92 cents at $ 42.86 a barrel, having touched a session high of $43.06, the highest level since December 7.
As the OPEC meeting draws nearer, African critics are beginning to ask whether the cartel really has the continent’s interests at heart.
“African countries that are part of OPEC have no say and no control over OPEC’s policies. Despite the impact of price volatility on African countries, OPEC has maintained its stance and is hurting the economies of Africa,” Damilola Olawuyi, director of Nigeria’s Institute for Oil, Gas, Energy, Environment and Sustainable Development reveals.
The continent’s struggle for influence within OPEC is not a new phenomenon. Decision-making has long been monopolised by members with the largest proven oil reserves and production capacity. OPEC’s four African members – Algeria, Angola, Libya and Nigeria – together account for just 8.8% of OPEC’s proven reserves. Compare that to Saudi Arabia – long regarded as OPEC’s undisputed hegemon – which controls 22.1% of reserves and dominates current output.
In the recent past, disputes between members were largely held in check by high prices and mutual prosperity. Between 2011 and mid-2013, crude fluctuated between a generous $80 and $115 a barrel. Yet entrenched disagreements over how to manage the slump have eroded OPEC’s legitimacy in the eyes of smaller producers – with many casting blame on the intransigence of Saudi Arabia. Determined to eliminate competition, Riyadh has refused to support cuts in output, gambling that low prices will force its increasingly threatening US shale rivals out of the market.
For African producers, the economic impact has been severe. Nigeria, which relies on oil exports for around 95% of its foreign earnings, has approached the World Bank and the African Development Bank, seeking emergency loans of $3.5bn. Angola’s 2015 budget forecast of oil at $81 a barrel has been exposed as fanciful. For critics, OPEC’s apparent indifference towards the plight of African economies reveals a system that has lost sight of one of its founding principles – to deliver economic prosperity to member states.
“Right now Nigeria is struggling with a debt-ridden economy and government can barely afford to cover basic needs. This is when we can see if OPEC is of any relevance. On the evidence of what we see today, that relevance is obscured. Why should we remain in OPEC if we have nothing to gain?” says Olawuyi.
Yet if, as looks likely, African countries opt to remain in OPEC, critics say that they must look for better ways to pool their scarce influence. Olawuyi suggests that OPEC’s smaller producers could learn a thing or two from African unity at the crucial Paris COP21 climate talks.
“Africa formed its own negotiating bloc and articulated a common policy. You can divide OPEC into very wealthy members and the resource-based but poorer members. Why can’t the struggling or fragile members come together as a strong negotiating bloc?”
Yet even if African countries can re-establish their presence at the top table, Hall believes that the failed strategy of senior OPEC members may already have done enough to permanently sideline the institution.
“My guess is that it could all fall apart quite easily. After 55 years, it’s run out of steam, misread the market and allowed alternative fuels into the market … OPEC got greedy.”