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Opinions of Thursday, 6 March 2008

Columnist: Asher, Bernard

Ghana's oil find. A wee bit too late?

It was indeed welcome news in the dying embers of 2007, when it was proclaim that Ghana had at last discovered oil in commercial quantities. For it had become increasingly clear, that the beloved motherland -confronted with the double-edged sword of surging world oil prices on the one hand and increasing unreliability of the Akosombo dam on the other, was reeling under the leaden diktats of the world’s financial markets on one hand and the deity, “Otwediampon Kwame” on the other and teetering on the brink of economic apocalypse. At this critical juncture, and in the nick of time, and as if by celestial providence, the ever compassionate “Nana Bosompo” yielded its treasures to Ghana in the form of the much sought-after black gold. How munificent! The legendary Ghanaian liturgical praxes of fasting, prayer and the all-night service had not been in vain after all!

The year 2008 has seen an unparalleled escalation in global oil prices to historic levels albeit to the glee of the world’s oil producing countries. These countries have seen their balance of payments overflow into burgeoning surpluses and in some cases have threatened to destabilize sensitive domestic sectors such as those of housing. The United Arab Emirates for instance having gained massively from high oil prices has seen a massive surge in the demand for housing. Without a corresponding increase in supply of housing due to an acute shortage of land, that country has experienced astronomical increases in house prices which have inadvertently priced out the poor. To meet the ever- increasing demand for housing, the Emirs of that country have had to resort to elaborate schemes involving reclaiming land from the sea at huge costs. The result is a vicious cycle of higher production costs prompting ever increasing house prices.

Other countries such as Venezuela and Iran with standing ideological and geopolitical beefs with Washington and to a lesser extent the West have also sought to use the black gold as their preferred currency of negotiation and have often threatened to, as it were, turn of the taps. The quondam country turned of the taps to one of the US oil multinationals, Exxon Mobil over a contractual dispute. The upshot of the above is an epic mobilisation of American, European and Japanese technological resources such as has not been seen since the industrial revolution. Hit hard in the face with the apparent vulnerability of their well-heeled economies to the whims and quirks of many a disgruntled ideological rebel yet oil- rich ruler around the world and especially in the Middle East, the U.S, Europe and other advanced countries have suddenly developed a sense of urgency in diversifying their economies from its over reliance on fossil fuels, especially oil.

Now this time round unlike the U.S oil crisis of the 1970s, the oil producing countries have clearly bitten more that can be comfortably masticated. Having pushed the gas-guzzling West to the wall they probably have dug their won graves and done themselves a great disservice; for as the West seeks ways of regularising the use of bio-fuels such as ethanol and renewable sources of energy such as wind farms and wave power, it is slowly working its way towards energy self-sufficiency which will be of dire consequences to the oil producing countries. The popularity of automobiles such as the Toyota Prius and the Honda Hybrid as well as the tremendous amounts of research funds being decanted into finding alternatives to gasoline will doubtless yield results and should alert these oil producing countries about the new path that the West is seeking to pave itself. Coupled with this is the nagging issue of global warming which has been classified as the mankind’s impending arch- nemesis that will doubtless render the homo sapien extinct if not remedied. Blocs such as the EU and some city- states within the US have issued strict emission parameters with the former requiring some pretty steep cuts in carbon emissions form all member states of up to 20% by the year 2020. Cities such as London have levied cutthroat levies on drivers under the guise of cutting congestion and have savagely levied an eye-watering £200 ($400) fee on all heavy goods vehicles entering the Greater London area on a daily basis or in default be fined £1000 ($2000).

It is within this complex of issues that Ghana has found its black gold. The question then is has it come too late? It probably has, sadly enough! For as pointed out above, it is indisputable that the wake-up call from the environmental lobby and the oil producing countries has plainly achieved its purpose of waking up the West and indeed the world. Fossil fuels have without doubt, started to lose their stranglehold over the world’s largest economies. Is the oil discovery in Ghana therefore to no end? It would be rather pessimistic to say that it is, but Ghanaians must, perforce, begin looking at pre-emptive ways to again diversify the economy away from oil and into other more stable and relatively permanent resources even before this much touted oil is exploited, for it is apt that this oil-find and the wealth associated with it will be transient and to bank our hopes on it is to replicate the myopic way the country hung its hopes on Cocoa soon after independence. What benefit will this black gold accord Ghana? Well, for starters, it should augment the supply of petroleum within the country itself and by so doing radically reduce the prices of petroleum products. This will hopefully instigate a virtuous cycle commencing with a diminution in costs of production and transportation as well as thermal power generation which should inadvertently prompt a decrease in inflationary pressures within the Ghanaian economy.

In the short term, Ghana should harness this oil wealth and employ it in a rapid spate of economic growth and development as was undertaken in the United Arab Emirates. And as that country did in the light of imminent exhaustion of its oil resources, (for the UAE is rapidly diversifying into financial services and tourism as it oil reserves is projected to expire in 2030) Ghana must widen its horizon and seek to use this oil -find as a momentary boost towards a more sustainable developmental plain. In other words this oil find must be the real engine for growth of Ghana’s economy and must, perforce, be used to propel it towards sustainable growth.

In the long term, however, this oil-find (in so much as it is seen as an export commodity) will be of little benefit to Ghana as the world wide market for it will begin to shrink and the gas-guzzling West navigates away from it. Appreciatively, the imminent government of Nana Akuffo Addo and the visionary NPP government possess the acumen and the wherewithal to undertake this vital venture in order to steer the country towards the proverbial higher plain. In conclusion, our celebration is -indeed -warranted but must be short-lived and hard planning needs to commence soon enough before Nana Bosompo’s black gold becomes the proverbial white elephant. Hopefully not!

Bernard Asher is a lecturer of Business Management and Economics @ Guildford College of Further and Higher Education, Guildford, Surrey, England,UK. . Email: basher

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