Africans should invest in local oil refineries to reduce diesel prices

Gas oil/ Diesel oil prices in Africa are doubling lately, the situation with diesel is compounding stress for the residents of African countries. In January 2022, the average sale of a liter of diesel was 288 Naira($0.7), currently, diesel in Nigeria sells for 700 Naira($1.69) per liter.

It is causing damaging anxiety for individuals and businesses that rely on the product to power generators that make up for historically unstable power supplies. Businesses are complaining of the unavailability and increase in diesel prices, making it difficult for people to afford.

Chairman of the Manufacturer’s Association of Nigeria(MAN), a trade group, said, “It is getting extremely difficult to produce and I don’t know how we are going to cope because 70 percent of industries are running on diesel”.

According to the Chamber of Petroleum Customers(COPEC), diesel prices in Ghana have increased by over 20%. The price of diesel has gone up at the pump across the country.

South Africans are currently facing a financial double blow as records for prices and electricity bills increase takes effect. Due to the increase in diesel prices, many South African companies’ operations were affected. In covering costs, some South African companies have added them to their product prices. Multichoice announced a 2.7% increase in their DSTV packages. MTN and Vodacom have also announced price hikes from April 1.

In Kenya, a liter of gasoline is currently sold at 134.72 shillings($1.18), which shows a 4% increase in price. Citizens have expressed their concern on the issue, a Northern Nigerian said, “What people need to know is that 100% of our business operations are done with diesel or fuel because there is no electricity.”

As many countries in Africa are trying to adjust to the changes in diesel prices, other disturbing issues arose in more damage. In Nigeria, the national power grid collapsed twice in three days causing a total blackout, and that was before including the expected negative effects of the ongoing Russia-Ukraine War.

There is no doubt this is an important resource for the day-to-day basic life of humanity. The sudden increase in diesel and gas prices in Africa has caused prices of other necessities to spike.

Gasoline is used in lighting and cooking, the sudden price increase in diesel has caused cooking gas to increase in many countries. Transportation costs have also increased with flight tickets switching at a 50,000 Naira($120) flat rate for one-way trips from about $80 in February due to scarcity of aviation fuel. Travelers complained painfully of the increase. Public road transportation has also increased. The cost of moving from one place to another with public transportation is now beyond the normal fee.

See more: How Africa can navigate growing monetary policy challenges

The Cause of Diesel Price Increase in Africa

As many reports have stated, the Russian Ukraine war is a major reason why diesel prices are increasing. It is baffling to see how many African countries are suffering from fuel scarcity and diesel costs when they are one of the world’s most oil and gas abundant countries. Countries like Libya, Nigeria, Algeria, Senegal, Mozambique, Egypt, and Tanzania, among others, are leading African countries with the most natural gas.

A major explanation why these countries are suffering from diesel price increases is the lack of local refineries, and these countries like Nigeria import refined products at prices that become more expensive with events like the Russia-Ukraine war.

In simpler terms, a country like Nigeria sells raw natural gas like Crude oil to European countries, these European countries process and refine the raw natural gasses to finish products like diesel, petrol and kerosene; and sell them back to the African countries at a higher price. This is simply a lack of vision in national economic growth.

If only African countries can strategize to build more local refineries to process natural gasses to refined products for cheaper sale of diesel to localities. This will effectively reduce the price of fuel and make it more available for all residents.

Due to the Russian-Ukrainian War, neighboring European countries including Russia and Ukraine are temporarily closed for refining these natural gasses causing the scarcity and large increase in diesel prices.

Source: Africa Exponent