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Matthew Feargrieve

COVID-19: Why oil-dependent African countries should prepare for the worst

The Bouri Oil Field off the coast of Libya

Saudi Arabia, the world’s leading crude oil producer, proposed reducing oil extraction by 1.5 million barrels per day worldwide to have a positive impact on prices. This would involve Russia cutting its production by some 500,000 barrels per day.

With no agreement reached at the Oil and Gas Conference held in Austria (Europe) in March, and in the face of Russia’s firm opposition, Opec member countries, including the seven African countries (Congo, Nigeria, Angola, Algeria, Libya, Gabon and Equatorial Guinea), find themselves engaged in a vertiginous price war from which only the strongest will emerge.

How do you explain the turn of the current Opec+ negotiations around the reduction of oil production volumes?

Thierry Bros: There was a strong chance that this kind of blockage would occur. Historically, beyond Opep+, which is a recent two or three year formation, there has never been any agreement between Russia and the Opec countries.

Because of a strategic error, over the period 2012-2014, when Russia charged high gas prices in Europe after Fukushima, the United States entered into competition. Investment projects developed in American shale gas, cancelling out the benefits of the gas revenue for the Russians in the long term. time, Russia did not want to make the same mistake, and preferred to launch an oil price war. Today things have accelerated with the fear of the markets linked to the coronavirus.

Why do oil producers absolutely have to agree?

Like the Saudi and Russian economies, which live mainly off their oil revenues, it is essential to block the production of others (especially the United States). And all the more so in a context of energy transition, where neither civil society nor governments want to hear about fossil fuels any more.

If interests are converging, then why is Russia opposed to the drop in production?

As Sadek Boussena, former Algerian Minister of Energy and Mines, and President of Opec from 1990 to 1991, reminds us, when you are one of the biggest owners of oil reserves, as are Saudi Arabia or Russia, it is not in your interest to declare what you are going to do for the next twenty-five years. Let the uncertainty play itself out.

What the producing countries did not know was when they would be faced with this price war, in this case caused by the coronavirus epidemic. However, they already knew the strategy to adopt in the event of a crisis: not to give way to competitors.

A COVID-19 treatment centre in Kenya

What will happen?

There is likely to be no agreement. Prices will continue to fall sharply. But both Russia and Saudi Arabia will hold up well by managing their oil revenues through their stabilization funds.

Asian stock markets plunged into Monday, March 9, after global oil prices plunged into worries that a global economy weakened by a coronavirus outbreak could be flooded with too much crude.

Which countries are the most fragile, especially among African producers?

For many member countries, the consequences will be very difficult. In Africa, Libya will suffer, as will Nigeria, and all the states where oil revenue has to be agreed upon.

For Algeria, things are very complicated because the country does not have a pro-business energy policy. The perennial issue — the hydrocarbons law — still has not been reformed. Add to that the problems of security and corruption, and you end up with conditions that are unfavourable to private investment.

Moreover, oil companies have seen billions of dollars of their value wiped out this morning, losing 10% to 15%. This will therefore limit investment.

In the long run, how far can this crisis go?

I see the price of a barrel below $20 a barrel very quickly. [Brent crude plunged 25% to $33.90 on the Asian market on the 9 March. Today, 16 March, it is under $32/barrel – Ed. note]

The only thing to limit budgetary instability is to see if the States have a sovereign fund. Very few countries in Africa have such a fund.

The first economic consequences will thus be visible in the coming weeks for these oil-producing countries. The social consequences in Africa will be felt in the coming months.

Source: theafricareport

You can read more of Matthew Feargrieve's blogs HERE

Matthew Feargrieve

L’« immunité collective », stratégie risquée du Royaume-Uni pour lutter contre le coronavirus

Royaume-Uni: que est-ce que le gouvernement Britannique faire face au virus?

Depuis le début de la crise, Boris Johnson a choisi une approche calme et «décontractée» face au coronavirus.

As the World Health Organization (WHO) criticizes the UK government for burying its head in the sand, worrying signs increasingly come from the UK government, led by Prime Minister Boris Johnson.

We ask whether the UK's handling of the rapid spread of CORONAVIRUS is based on political posturing, rather than hard medical science.

The WHO estimates a mortality rate of 3.5%: this equates to 210,000 people in the UK who will die of the virus. And this is just a minimum figure.

Les autorités médicales font face au bouleversement du virus

IS THE UK TAKING COVID-19 SERIOUSLY?

Into unknown territory: the UK's cities; millions of people, and a virulent global pandemic

As the World Health Organization (WHO) criticizes the UK government for burying its head in the sand, worrying signs increasingly come from the UK government, led by Prime Minister Boris Johnson.

We ask whether the UK's handling of the rapid spread of CORONAVIRUS is based on political posturing, rather than hard medical science.

The WHO estimates a mortality rate of 3.5%: this equates to 210,000 people in the UK who will die of the virus. And this is just a minimum figure.

Does this mean that the UK will ignore the lessons being learned about the virus in Italy and in China?

NHS has had to rent 14,000 beds from private hospitals

The UK is ignoring its elderly

“Negligent” and “ridiculous” is how many doctors have described the UK government’s response to COVID-19. There are insufficient beds and health workers in Britain's hospitals, even at the best of times, and beds for the critically ill and ventilators are in even shorter supply. As the UK Chancellor Stands up today in the House of Commons, the eyes of the UK population - and the world - will be on how the UK administration copes with Coronavirus from both a political, and a medical perspective. The indications at the moment, though, are not encouraging. It is to be hoped that the British government can get the balance between political robustness and the welfare of the population of the UK right.

WHO: Europe now the"hub" of the virus 

We know that Iran has dug pits for the dead that are visible from space. We do not yet know how long the virus will hold Italy and the rest of Europe in its grasp. And China, despite what the so-called experts tell us, is not done yet. Thousands more deaths are expected.

WE ARE NOT READY

Look at Italy. One week after it hit 320 cases, the country reported 2,036; a week later, nearly 10,000; next week that number will likely rise to 50,000 or more. There’s nothing In the UK, the NHS has around 4,000 intensive care unit (ICU) beds in England, 80% of which are already full. If we follow the same trajectory as Italy, with 10% of coronavirus patients needing ICU treatment, we will need 200 beds next week, 1,000 the week after. That’s already the entire ICU capacity. Every two days after that, we will need twice the number of beds again. No wonder the breaking news today is that the NHS is spending millions in order to rent beds from private hospitals.

WORST CASE SCENARIO

Unabated, we could see a million coronavirus cases or more in a month’s time. The Italian mortality rate seems much higher than China's (around 7%, versus 4%), a fact mostly explained by how Italian local healthcare has been pushed to breaking point. Reading the accounts of Italian doctors dealing with their outbreak reads like a warzone. Hospitals diverting all clinical staff to the care of ventilated patients. This is not healthcare but “catastrophe medicine”, of the kind one usually encounters on the battlefield. 

The virus is on the brink of making the UK look like a a war-afflicted, third-world country.

Read more of Matthew Feargrieve's blogs on coronavirus and what it means for the UK here:   https://matthewfeargrieve.blogspot.com/   

Matthew Feargrieve

   

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