CHEAP OIL: Winners and losers



Chadian petrol station north of Ndjamena

Its Advent and time to enjoy eating one small square of chocolate every day. Our calendar arrived by post yesterday, Fair Trade, Christmas story ,Good news! But fair trade and development is bigger than chocolate, coffee and  a bit of  ethnic jewellery;  cheap oil is the big economic story and it seems that there will be winners and losers. As usual it will be the poor that will suffer, apparently no Good News for them this year ,but what can we do?

The Organisation of Petrol Exporting Countries( OPEC)  has met this week and has decided that it will not cut production in order to shore up the price of crude oil which have fallen dramatically $110 to $78 a barrel  (30%)  in the past 6 months, There is a surplus of oil in the world  market, the US production of comparatively cheap shale oil and start of commercial fracking along with decreased global demand due to the economic downturn have apparently decreased demand and hence the price has fallen.

Good News for the struggling oil importing  European economies , decreasing inflation, stimulating growth and employment.  Potentially  good news  for you at the petrol pumps in the UK. Have the prices gone down or are the distributors just making more money?  Winners and losers? The rich world gets some unexpected help to maintain the status quo but If we burn more fossil fuels  we increase the risks of global warming.  Sea levels may rise but that is clearly going to be more of a problem in  the UK than Chad , so why should I be concerned?   Cheap oil for the consumer comes at a cost for the producer hence the OPEC meeting of the oil producing nations.

Doba oil field and pipeline Chad

Super rich Saudi Arabia will apparently according to the BBC will be a short term loser.  The world's biggest oil exporter needs a price of $85per barrel   to break even, the current price is $78  but has a reserve fund  of $700 billion to absorb the temporary loss and was vocal in maintaining the current output. Why are they doing this?   The BBC and Guardian have various suggestions. To put pressure on the US fracking industry? To put pressure on the finances of Russia and Iran? To give a Christmas present to the UK ( I made that one up) Who knows?

Not all oil exporters  have the reserves of the middle eastern nations.  In Africa  Nigeria and Chad are heavily dependent on oil income. Chad's oil boom  since 2003 has led to a massive infrastructure programme, tarmac roads in the capital  for the first time, hospitals, prestige buildings, electricity generation plus distribution networks, and a massive increase in public centre staff and wages, nurse, doctors teachers and the military.  There is also an ambitious program to supply free health care for the first 24 hours for emergencies. Chad has difficulties with accounting for exactly how all the revenues are used but some good is coming from this windfall. A drop in 30% of the price of a barrel of crude oil will no doubt affect the amount of money in the government coffers which  rely overwhelmingly on oil.   As usual it is the poor that suffer most when times are hard.

Ndjamena skyline

As a rich  person and employer in Chad I will ,as you would expect,  be cushioned from any ill effects and may even benefit.  Prices will rise less fast for me  and wages for employees  will not rise so quickly for the hospital. Since the hospital opened we have had difficulty keeping  experienced staff as we cannot match the increasing salaries and benefits of the public sector. Also if the state hospitals cannot offer  free treatment reliably perhaps our hospital will  have more paying patients. What a sad world that we as a mission might benefit from others difficulty. We are not in competition, rather  we work alongside the public sector for the good of the people, We hope to partner more  the Ministry of Health  the suggestion of Chadian doctors is still on the table as is involvement in TB, HIV and malaria programs so we need to pray for a  vigorous and improving public sector financed by oil.

Perhaps driven by financial constraints above or perhaps simply to regulate public service better there have been attempts  to change working patterns and pay structures for teachers. This led to a teaching strike and the disaffected students protested leading to a day of significant rioting in the city with some reported deaths both of police and demonstrators.

Djermaya oil refinery Chad

Another source of frustration over the past 2 months has been a shortage of fuel at the pumps owing  to a period of maintenance at the Chadian national oil refinery that took longer than expected.  Prices have been pegged at the pumps  ( 60p a litre )and sales by the roadside outlawed to avoid people profiteering. Although there were the stockpiles the amount reaching the petrol stations has been rationed and this has led to long queues.

 

The hospital remains busy with a record number of births, an increased number of operations, a stable number of in patients but a sharp downturn in outpatient numbers from the middle of the month. Some of this will be due less malaria but  the decrease  is much more than last year so clearly there are other factors making people put off visits. Perhaps the two above play a  certain role. I hope those who chose to  stay away were not too sick, but on the whole people are not very  good at deciding.

What is clear that  these are complex situations  and how they are linked to cheap oil is difficult to say. But ultimately the rich will cope and might even benefit and as usual  it is the poor who will suffer.  I wonder what God thinks to our system of winners and losers?

'Blessed are you who are poor, for yours is the Kingdom of God.
 Blessed are you who hunger now, for you will be satisfied'

Maranatha.

Mark and Andrea

PS: alternative Chadian petrol stations  presumably functioning elsewhere in the country. This is still a developing nation.