Ethiopia: Oil’s Trickledown Economics


The world seems to be suddenly losing its thirst for oil. The price is falling to an all-time low. At this time, it is selling for 54.07 dollars per barrel in the world market.

Oil had changed the game of the global market since 1973, when it had skyrocketed to an unprecedented level. The wave had run down the spine of the world economy resulting in untold commodity price increases that could not be explained through any economic theory.

Every time I paid for petrol at the filling stations into the tank of my old “beetle”, I had found it hard to understand why the price of oil should be so dear until I went down to the Kalub oil exploration site in the Ogaden Zone, Eastern Ethiopia, some 30 years ago.

My colleague, an engineer from the Ministry of Mines(MoM), and I were sent there for an inspection mission to see if the-then Soviet Union contractor was conducting the exploration work according to schedule.

We were flown from Dire Dawa to Godie where we were received by an expert guide that drove us in land cruiser to the exploration site. I was carried away by what I saw down from the air.

It was all brown and dusty. But that was only a temporary blanket for it had changed its colour to green the next morning as it was raining all night. The rain had washed away the dusty colour and uncovered the green vegetation thick with acacia and throng hedges.

As we approached the site the next morning, we could see the massive drilling right standing in the middle of nowhere crowded by many experts wearing protective helmets. Some were mounting on the stairs of the ladders, while others seemed to be doing other things on the platform.

The whole set appears to be a big ship in the middle of the sea. It was not my first time to see a rig, in general, except that this one was colossal. My first encounter had been at the Altuo Site at the geothermal exploration project in the vicinity of Arsi Negelle under Shashemene Zone.

While we were being shown around, my dreams came ahead of me. I was imagining a rapidly growing town, emerging and changing the arid desert into a thriving land, where many youngsters were hired in various fields of the oil project.

Connecting and access roads would be built at a spectacular speed to allow massive oil tankers and heavy duty trucks with their reverberating motor sounds being heard from afar. I was also dreaming of Ethiopia making headline news in the global market as a newly added member of the Oil Producing & Exporting Countries (OPEC).

After the explanations I was hearing, I came back to myself and realised that oil exploration is not as simple and cheap as it would seem to be.

The task starts with a physical survey of collecting samples of sedimentary rocks or pebbles that are to be found in the geological structure or the vicinity that would lead into a general survey and taking air photos and maps. The next step would be making detailed maps and studies of the seismology of the terrain before some scanning is done.

Then the rigging starts as a trial to identify what is available underground. Oil lines are said to be lying deep in the ground like the blood artery in the human body. Drilling or rigging may miss the arteries or the veins even after digging the ground deeper than thousands of meters.

The American Tennaco Company was said to have dug at least five wells, some of which were reported to be sterile. Some of them had shown some clues of crude.

The euphoria following the news was wild. People were cracking jokes by warning smokers not to let their cigarettes once they cross over the River Awash lest it would cause fire and destroy everything.

Times have changed. And so have many of the realities in the exploration of oil in the nation.

Of late, Ethiopia seems to be intensifying the search along the Omo Basin. The discovery of oil in the neighbouring countries of Kenya and Uganda seems to be a glimmer of hope that one day Ethiopia shall also strike the shell of the black gold.

On the market side, though, it is time to ask whether the recent price fall in the global price of oil made any impact on our economy. Many of the economic variable costs would certainly be affected.

But, would this translate into some trickling down to the level of the filling stations, and hence transport fares?

The change may not be equal to the percentage change in the oil market. But it would definitely have a significant impact on the whole economy, at least psychologically.

With the reduction in the price of the important commodity, though, cheating traders that hoard goods and commodities could still seize the opportunity to their benefit. Thus, concerned government offices should denounce them and take actions on unlawful traders.

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