The five largest producers of crude oil in Africa face a combined production decline of 19 percent as a result of the pandemic’s effect on oil demand and the acceleration of energy transition efforts, according to a new report by PwC.
The Africa oil and gas review 2020 notes that the pandemic has caused the worst oil industry crisis in history and that oil demand will likely never recover to pre-pandemic levels.
This demand loss will also drive lower revenues for oil exporters, the authors of the reports said, helped in no small measure by the green transition.
“With the oil price at approximately $40 per barrel, oil-exporting countries will experience long-term decline in their export revenues as a result of the renewed weakness in global oil prices, coupled with the accelerated transition to renewables in key importing countries,” the authors said.
“Covid-19 has not only caused the biggest global oil demand slump in history, at nearly 40 times worse than the global financial crisis of 2007, but has, in fact, accelerated the global energy transition by as much as five years, as the developed world uses the renewable energy transition to anchor economic stimulus packages and new economic diversification,” the report also said.
The report suggested that African countries—particularly the oil producers, including Nigeria, Angola, Egypt, Libya, and Algeria—could benefit if they choose to use their oil revenues for the early adoption of renewable energy.
Overreliance on oil revenues is known to be a problem, especially for developing economies but weaning an economy off petrodollars has proved challenging even for affluent Gulf producers.
This means African oil exporters have a tough challenge to overcome if they are to diversify away from oil and into renewable energy, especially since governments there cannot afford to be as generous with green-focused economics stimulus as EU governments.