COVID-19, Energy Volatility, and Implications for the Oil-producing States in Africa

This chapter examines the severity of the 2020 energy crisis in the United States of America and its implications for oil-producing African states, employing a qualitative research methodology. By using Case studies from Nigeria, Angola,, and some selected Middle East and North African states,, along with secondary literature from books, journal articles,, and institutional reports, the paper strives to better illuminate the depth and severity of the energy crisis, with the supply and demand theoretical underpinning further underscoring the situation. Since the energy crisis was not a permanent phenomenon, this paper argues that it was both a transient occurrence and a game-changer. The detrimental economic effects on African economies in 2020 were primarily caused by the COVID-19 pandemic and exacerbated by the United States’ energy crisis. Such a cataclysmic energy and economic downturn led to 2020 being entirely written off in the energy fraternity. Energy events of the year caused an economic blizzard that affected the energy sector in the United States, with far-reaching effects on energy-producing states in Africa, such as Nigeria and Angola. For the first time, U.S. oil prices plummeted into negative territory, reaching their worst record. West Texas Intermediate futures, the United States’ benchmark, plummeted to unprecedented levels, triggering a domino effect in the oil market and causing ripple effects in African energy-producing states such as Nigeria, Angola, Algeria, and Egypt. A decline in global oil demand, induced by the COVID-19 pandemic, created a supply glut due to the sudden drop in energy demand. Crude oil volumes held in the United States reservoirs rose exponentially, while the COVID-19 pandemic caused retrogressive effects on its supply by drastically curtailing consumption. Travel restrictions imposed worldwide virtually shut down the world by suffocating energy demand, causing fuel prices to fall drastically as both onshore and offshore storage space quickly filled up. A shortage of storage facilities compelled U.S. oil producers to pay buyers to take away deliveries, causing over-supply and falling prices in energy-producing states in Africa. Job fatalities have become a significant negative externality of economic stagnation in the energy sector in the United States, as approximately ten million people are employed in the oil industry, either directly or indirectly. The overabundance of crude oil in the USA also led to far-reaching ripple effects in energy-producing states in Africa, including job losses, economic downturns, and reduced revenue in countries such as Nigeria, Egypt, Angola, and Algeria.