The other day I took a good look at my shoes: they are wearing out because I am walking more and driving less. The price of gas keeps my 17-year-old car parked at the side of the road for two or three days at a time. I like to see how long I can go without driving it so I can exercise more, save money on gas, and cut down on the inevitable wear and tear (and repair bills) on my old car.
The price of gas is down a little this week following all the financial turmoil. But some of the reasons the prices have been so high recently have not changed: Some oil-producing areas are politically unstable, and there is a lot of corruption and violence. Many oil-rich countries are also paradoxically quite poor, and are descending further into violence and poverty despite the best efforts by some to use petrodollars responsibly. Cambodia and Ghana, two countries that recently discovered oil, are now considering what this means for their future. They have a lot to think about.
The choices in Ghana are pretty clear: will the government use money from recent offshore oil discoveries to build more schools, hospitals, roads, and hire doctors and teachers? Or will Ghana go the way of Nigeria, a country with more than 90 percent of the population living on less than $2/day while the government rakes in nearly $60 billion a year from oil? This is after 50 years of pumping oil. Nigeria is a great example of why oil can be a curse, but there are many others: Chad, Angola, Equatorial Guinea, all are exporting oil while people die of preventable diseases every day. As many an economist can tell you, oil can be as much of a curse as a blessing, as explained in our report “Extractive Sectors and the Poor.”
There is one important factor that could help Ghana: information. Citizens in oil-rich countries need to know what oil companies are paying their government, and how those revenues are used. They can look at laws that govern these resources, and ensure that oil money pays for teachers and school desks instead of a new bullet-proof Mercedes for the minister of energy. The Extractive Industry Transparency Disclosure (EITD) Act of 2008, introduced in the House of Representatives by Barney Frank (D-Massachusetts) last spring would require all US- and Europe-based companies registered by the SEC to disclose revenue payments to governments. This legislation will make a difference in addressing corruption and misuse of oil revenues, which are described in exhaustive detail in a report about to be released in Washington by Senator Richard Lugar (R-Indiana): “The Petroleum and Poverty Paradox: Assessing US and International Community Efforts to Fight the Resource Curse.”
Increasing transparency and responsible management of oil revenues is also about security. Steve Manteaw, director of the Integrated Social Development Center in Ghana, says that in coastal areas near the offshore oil fields he is seeing young people organize groups to protect their perceived interests. This is frighteningly similar to the advent of armed conflict in the Nigeria’s Niger delta, where the military recently staged a major offensive and arrested over 400 alleged militants. The “Leadership” newspaper in Nigeria says “The militant group emerged about three years ago, calling for more federally controlled oil-industry revenue to flow to the impoverished southern states where the petroleum is produced.”