The Differential Effects of Oil Prices on the Development of Renewable Energy in Oil-Importing and Oil-Exporting Countries in Africa

Abstract

The shift to renewable sources of energy has become a critical economic priority in African countries due to energy challenges. However, investors in the development of renewable energy face problems with decision making due to the existence of multiple criteria, such as oil prices and the associated macroeconomic performance. This study aims to analyze the differential effects of international oil prices and other macroeconomic factors on the development of renewable energy in both oil-importing and oil-exporting countries in Africa. The study uses a panel vector error correction model (P-VECM) to analyze data from five net oil exporters (Algeria, Angola, Egypt, Libya and Nigeria) and five net oil importers (Kenya, Ethiopia, Congo, Mozambique and South Africa). The study finds that higher oil prices positively affect the development of renewable energy in oil-importing countries by making renewable energy more economically competitive. Economic growth is also identified as a major driver of the development of renewable energy. While high-interest rates negatively affect the development of renewable energy in oil-importing countries, it has positive effects in oil-exporting countries. Exchange rates play a crucial role in the development of renewable energy in both types of countries with a negative effect in oil-exporting countries and a positive effect in oil-importing countries. The findings of this study suggest that policymakers should take a holistic approach to the development of renewable energy that considers the complex interplay of factors, such as oil prices, economic growth, interest rates, and exchange rates.

Assessment of the potential for sustainable sugarcane production for bioenergy in Angola

“…Angola is potentially one of the richest countries in the world in mineral and natural resources [21]. Oil production and its supporting activities contribute to approximately 50% of GDP, more than 70% of government revenues, and more than 90% of the country's exports [20,22] The unemployment rate in Angola reaches almost half of the population, and approximately 70% of Angolans live below the poverty line (with less than US$ 2 per day), with poverty being more prevalent in rural areas (58%) than in urban areas (19%) [20]. Rapid industrialization and urbanization have led Angola to become a major consumer of energy, and its energy expansion has caused much concern [23].…”