Oil futures are reaching ever upward, drawing closer
and closer to the price range that will have catastrophic and lasting effects
on the growth and development of our very oil
dependent economy.
And
we are as a country unprepared. Only five years ago, a barrel of oil cost $25. Today, the oil
price is threatening the $100 price barrier that-adjusted for inflation- was
only reached in the crisis of the 1970s. Analysts forecast even greater price
increases; Goldman Sachs predicts an imminent breach of the $100 barrier, and a
former Shell chairman charges politicians with sitting idly by while the global
economy sleepwalks into $150 a barrel crude.
There
are two main reasons for the sharp rise in oil
prices; the first is the increased appetite in the developing world for energy,
cars, industries, increased air-travel and all the conveniences of an
increasingly westernized life. China and India are
especially gluttonous, slurping up billions of gallons of petroleum in fuel for
their burgeoning middle-classes and plastics industries. Countries like ours are not too far behind, everyone in Nairobi wants to be driving these days.
The
other reason is the fact that global stocks of crude oil are running out. Some analysts even claim that we are now long past peak oil,
the moment when the global petroleum production rate hits its maximum.
While it is true that many countries are joining the list of oil exporters, the new oil wells
are small in comparison to the massive oil wells, in Saudi
Arabia, the North Sea and Iran for
example, that are fast drying up. The output at these new wells does not match
the escalating and insatiable global demand. To aggravate an already bad
situation, this scarcity and the desire to exercise strategic influence on
exporting countries is fomenting unrest in the Middle
East. From Turkey through to
the old Soviet republics and Central Asia sits a
powder keg so primed for explosion, it keeps energy markets on a constant knife
edge, and speculators constantly betting on high prices.
Even
worse, the world of oil is an obscure realm where
everything seems secret and very little is known for a fact. Many analysts are
suspicious of the declared reserves of many OPEC countries, and oil companies themselves operate under rules that are
inscrutable and often designed more to cheer stakeholders up than to reflect
the truth. It is after all in their interests that they keep prices low enough
to make alternatives they do not control less viable.
Still,
some of them are confessing that there is little left in their tanks. Mexico recently
announced that its reserves would run out in just seven years. What this means
is that we may very well be much closer to severe shortages than is immediately
obvious. The efforts to decrease global dependence on oil
have been waged for a number of years now, but there's a real sense that unless
governments take on this looming catastrophe head-on, there will be sorry days
for their citizens in the near future.
In
our Kenyan experience, climate change and peak oil come together to paint a very bleak picture for energy
security in the future, especially as regards electricity production.
Rural
electrification programmes -KPLC figures say there are 150,000 new connections
every year, an increasingly prosperous middle class, an electricity penetration
of only 15% (2005) and plans to industrialize the economy, all signal an even
greater demand for electricity in the country. At the same time however,
decreased rainfall has led to such low water levels in the mainstays of our
power generation system- the hydroelectric dams that we increasingly we must
depend on petroleum dependent and therefore oil-price
sensitive thermal generators to meet the shortfall. As of 2005, 23% of our
energy needs were met through such diesel-powered generators as those belonging
to Tsavo Power and IberAfrica. Ministry of Energy projections then showed that
these generators would this year be providing 34.5% of our energy requirements.
In 2005, these sold power to the national utility at Kes 7.19 and
Kes 9.96 per KWh compared to KenGen's mainly hydropower energy which cost
KPLC only Kes 2.57. This resulted in a retail cost of US 9.1¢, way in excess of
what prevails in our industrial competitors Egypt (4¢) and South
Africa (2.5¢). Quite clearly
we cannot continue with the current trend that sees us increasing our reliance
on the thermal generators, if Kenyan industries are to make products that are
competitively priced abroad and if we are to attract increased FDI.
In
addition to power costs, figures from the Registrar of Motor Vehicles indicate
there are 12,000 new cars registered every month. The national appetite for oil it seems just grows and grows.
Increasingly
also, around the world the diversion of agricultural land for the production of
biofuels is leading to food shortages and price inflation. What would be a
ready alternative, i.e. agro-fuels, compete with food crops for land, and like
has recently happened in Mexico, push food
prices increasingly higher.
The
effect of high fuel prices will also impact badly on the environment as
families that previously depended on kerosene will be sent back to using
firewood and charcoal.
And
this is the curse of the rising cost of oil; it acts
as a regressive tax. Those with less have fewer options at their disposal and
will be forced to give away even more. As oil prices
creep upward, the government may even be compelled to cut back on fuel levies
thus reducing government revenues and subsequently its spending on social
programmes.
All
in all this may very well be the most important issue at the campaigns, and
curiously it is the one none of the candidates is talking about. It may sound
like scaremongering, but the cocktail of climate
change and peak oil is much more dangerous than
global terrorism or the threat of nuclear weapons. It threatens to completely
change our way of life and impoverish our country. The key to getting out of
this ahead is to be ahead of the game. We are already very late, but even now
if the government can come out and tell the public just what horror we are
facing, there may yet be scope for meaningful change.
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