1 How to Respond to Energy Transitions in Africa …
9
Besides climate change, another threat to the future of fossil fuels in
Africa is the fall in oil prices due to the global energy transition debate
and recently, due to the COVID-19 economic crisis. As noted in Section
one, various international financial institutions were already banning
investments in fossil fuels due to environmental concerns. The COVID19 pandemic has exacerbated the situation. For instance, on Monday
April 20, 2020, the world experienced a drop in the US crude for May
turning to negative. This caused a lot of bankruptcy panic among various
oil companies, especially US shale companies. The drop in oil prices was
mainly due to the March 2020 Russia–Saudi Arabia oil price wars. Additionally, the COVID-19 pandemic, which has reduced oil demand in the
transport sector and manufacturing industry, hence leading to the low
oil prices. Consequently, there has been massive stress in the oil industry
with many companies losing their value including Halliburton, Noble
Energy, Marathon Oil and Occidental (OXY)—which have lost more
than two-thirds of their value.
21
One can arguably say that the above developments do favour the
energy transitions efforts which advocate for renewable energy. Additionally, for the first time, renewables overtook coal-fired power generation in the Organization for Economic Cooperation and Development
(OECD). According to the IEA April 2020 report, electricity produced
from natural gas in 2019 increased by 4.8% and was responsible for
29.0% of the total electricity production. Comparatively, coal production in the same year was 13.4% lower than in 2018 contributing
to 22.1% of the total electricity production.
22 Even though African
countries were already embracing renewables, the developments above
and the volatile oil prices have spurred stronger political emphasis on
diversification on the continent.
In this respect, therefore, the main threats to the future of fossil
fuels in Africa include climate change; lowering costs of renewables;
pandemic-related economic crises such as COVID-19; pressure from
21 Egan, M., Oil Prices Turned Negative. Hundreds of US Oil Companies Could Go Bankrupt.
CNN Business. 21 April 2020. Can be accessed at, https://edition.cnn.com/2020/04/20/bus
iness/oil-price-crashbankruptcy/index.html. Last accessed on 22 April 2020.
22 International Energy Agency (IEA), Key Electricity Trends. 14 April 2020. Can be accessed
at, https://www.iea.org/articles/key-electricity-trends-2019. Last accessed on 20 April 2020.
9
Besides climate change, another threat to the future of fossil fuels in
Africa is the fall in oil prices due to the global energy transition debate
and recently, due to the COVID-19 economic crisis. As noted in Section
one, various international financial institutions were already banning
investments in fossil fuels due to environmental concerns. The COVID19 pandemic has exacerbated the situation. For instance, on Monday
April 20, 2020, the world experienced a drop in the US crude for May
turning to negative. This caused a lot of bankruptcy panic among various
oil companies, especially US shale companies. The drop in oil prices was
mainly due to the March 2020 Russia–Saudi Arabia oil price wars. Additionally, the COVID-19 pandemic, which has reduced oil demand in the
transport sector and manufacturing industry, hence leading to the low
oil prices. Consequently, there has been massive stress in the oil industry
with many companies losing their value including Halliburton, Noble
Energy, Marathon Oil and Occidental (OXY)—which have lost more
than two-thirds of their value.
21
One can arguably say that the above developments do favour the
energy transitions efforts which advocate for renewable energy. Additionally, for the first time, renewables overtook coal-fired power generation in the Organization for Economic Cooperation and Development
(OECD). According to the IEA April 2020 report, electricity produced
from natural gas in 2019 increased by 4.8% and was responsible for
29.0% of the total electricity production. Comparatively, coal production in the same year was 13.4% lower than in 2018 contributing
to 22.1% of the total electricity production.
22 Even though African
countries were already embracing renewables, the developments above
and the volatile oil prices have spurred stronger political emphasis on
diversification on the continent.
In this respect, therefore, the main threats to the future of fossil
fuels in Africa include climate change; lowering costs of renewables;
pandemic-related economic crises such as COVID-19; pressure from
21 Egan, M., Oil Prices Turned Negative. Hundreds of US Oil Companies Could Go Bankrupt.
CNN Business. 21 April 2020. Can be accessed at, https://edition.cnn.com/2020/04/20/bus
iness/oil-price-crashbankruptcy/index.html. Last accessed on 22 April 2020.
22 International Energy Agency (IEA), Key Electricity Trends. 14 April 2020. Can be accessed
at, https://www.iea.org/articles/key-electricity-trends-2019. Last accessed on 20 April 2020.