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Africa struggles with oil inflation

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by Brian Turner
Africa struggles with oil inflation

On top of all the other problems facing Africa, rising oil prices have begun to have an effect, especially in non-oil producing nations.

In Kenya, for example, higher oil prices have been a big factor in driving inflation in the year ending in June to 16 percent, its highest level in over 10 years. Last year in Kenya, inflation remained in single digits.

The higher prices are not just felt in one part of the economy. Manufacturers face higher rates to run their operations, but ordinary people also must pay more for kerosene to cook and to light their homes.

Consumers are charged higher prices for goods, as well, because transport costs are driven up as oil costs more, and those costs are passed on to the consumer.

Even oil-producing states in Africa, however, are not entirely protected from the harmful effects of rising oil prices, even if those effects are different for them.

More income from selling their oil and increased investment as new oil resources are developed can cause those nations’ currencies to appreciate beyond reasonable levels.

Additionally, these oil-producing nations have little incentive to develop other resources or industries while the oil money continues to roll in.

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News posted: July 1, 2005

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