Soaring oil prices undermine poverty alleviation and gains from debt cancellation in Africa

Last year's G8 Summit in Gleneagles focused on African development. Even though critics say that one year after the Summit, not much has come from the promises, at least the committment to cancel African countries' debts was taken. At the new G8 Summit, in St-Petersburgh, energy tops the agenda.
So what happens when we put both Summits next to each other and analyse them in the context of African development? Then we see a full-blown crisis. Neither debt-cancellation has made any progress, and African economies see their oil import bill skyrocket, with disastrous socio-economic consequences. With oil prices touching US$80 per barrel, the poor petroleum-intensive [see full text] African countries suffer more than robust economies, and attempts at alleviating poverty or at achieving the Millenium Development Goals are being jeapordized.

Yesterday, we reacted to Earth Policy Institute director Lester Brown's remark that ethanol could hurt the world's poor. But according to both the IEA [*.pdf] as well as the World Bank and the African Development Bank Group ("Impact of High Oil Prices on African Economies") [*.pdf], high oil prices threaten to hurt them much more. Moreover, many of the poor Brown refers to, are rural households living in countries that could become biofuels producers. The production of and reliance on bioenergy in sub-Saharan Africa has now become much cheaper than importing fossil fuels such as oil and gas. Therefor, bioenergy and biofuels production is one of the single most effective means to alleviate poverty in Africa, and to reduce dependence on oil, which is becoming a heavy burden on those poor economies.
ethanol :: biodiesel :: biobutanol :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: Africa ::

Record high oil prices - fueled by the world's oil dependence - are undermining some of the benefits of last year's G-8 achievements on debt cancellation and putting serious stress on many of the world's most impoverished countries, a policy brief published today revealed. High Oil Prices: Undermining Debt Cancellation and Fueling A New Crisis?, co-published by Jubilee USA Network and Oil Change International, shows that developing countries continue to pay more for oil imports than they receive in debt relief.

"We are concerned that the rising cost of oil imports is draining far more money out of impoverished countries than debt cancellation is contributing each year," said Neil Watkins, the National Coordinator of Jubilee USA Network. "This money was supposed to be used for healthcare and clean water, not oil."

"Like the addicts in denial that they are, G8 leaders are ignoring the central role that oil plays in driving a new debt crisis and causing climate change," said Graham Saul, International Programs Director of Oil Change International. "The G8 cannot overcome energy poverty or achieve lasting energy security if they continue to believe that more oil is the answer," he continued.

Adjusting for inflation, oil - which is hovering around $80 a barrel - is now more expensive than at any time since 1980. International Energy Agency officials estimate that the cost of oil for all of sub-Saharan Africa will rise by $10.5 billion in 2005. This is more than ten times the annual debt relief received by all 14 African countries included in the 2005 G-8 debt deal.

Developing countries are also hit hardest by the growing catastrophe of climate change, driven by our addiction to oil and other fossil fuels. Global warming will have a major impact throughout the Global South, claiming hundreds of millions of lives and reversing poverty alleviation gains in many impoverished countries.

The brief outlines the urgent need to challenge G-8 plans to increase support for the oil and fossil fuel industry and calls on governments around the world to focus international efforts on strategies that will simultaneously address energy poverty, crushing debt and global warming.

The policy brief recommends: ending direct and indirect subsidies to the oil industry and other fossil fuels, dramatically increasing support for energy efficiency and new renewables, canceling all unjust and unfair debts and adhering to responsible financing standards moving forward in order to avoid a new debt crisis re-emerging.


More information:

World Resources Institute database on Energy Intensity, showing that sub-Saharan Africa has the highest petroleum intensity of all regions, making it most vulnerable to rising energy prices.

PanAfrica: The Poverty of Energy Security at AllAfrica.
PanAfrica: Soaring Oil Prices Threaten to Undermine Gains from Debt Cancellation
at AllAfrica.
High oil prices affect poor countries, hamper world economy: Russian minister. Xinhua.