ABSTRACT
Oil, or ‘black gold’, is one of the key sources of energy in the world. There is no perfect substitute for oil. It does have theoretical substitutes, such as coal or solar energy, but they cannot be used to operate the majority of the means of public and private transport. None of these substitutes are promising enough to merit development in the future. Oil has been the lifeblood for the global economic system for more than a century and will remain so in the distant future. Almost all the countries in the world are heavily dependent on oil for it is an engine of growth.1 A rise in the price of oil can have an adverse impact not only on an individual country per se but the international system – politically, economically and strategically – as was witnessed by the rise in the price of oil in the two oil shocks in 1973-4 and 1979-80, during the first Gulf War in 1991 and during 1999-2000. However, the economic gain from a fall in the price of oil is substantially less acute than the loss from the rise in the price of oil. There are various factors which affect the price of oil, such as demand and supply side factors, speculation and commodity trading, and geopolitical instability, especially in the Middle East. The presence or absence of significant oil reserves in a country causes a quandary. Countries that have small oil reserves relative to their consumption, such as India and China,2 or those that have insignificant oil reserves, such as Japan, suffer from energy insecurity. Such countries have to take extensive measures to ensure and secure their energy security. On the other hand, countries which have significant reserves of oil may also suffer from the resource curse, the ‘Dutch Disease’. This is evidenced in countries in Africa, especially West Africa, which have significant but not substantial oil reserves relative to countries in the Persian Gulf. Most of the oil-producing countries in Africa, especially West Africa,3 suffer from ‘Dutch Disease’. Over-reliance on the oil industry and the failure to use the proceeds from the oil revenue to diversify into different sectors has blighted the majority of the oil-producing countries in West Africa.
