Most African countries could be paying less for oil products, according to a new study. The study reviews the efficiency of the petroleum sector in twelve selected countries of Sub-Saharan Africa and suggests ways in which the product market could be made more efficient. For example, the study says Madagascar could save about US$500 million if it uses rail to transport oil instead of road.  Use of rail would transport more oil at lower costs.

Recent oil price shocks severely impacted oil-importing African governments and their citizens. The objective of this study was to identify best practices which might be applied in order to keep oil product costs as low as possible, consistent with good operating procedures.

The World Bank Manager, Oil, Gas, and Mining Policy Division, Paulo de Sa said, “This new study compares the efficiency of petroleum product logistics, pricing and regulatory systems in Senegal, Mali, Cote d’Ivoire, Burkina Faso, Niger, Uganda, Kenya, Tanzania, Malawi, Madagascar, Botswana and South Africa.”  "In these markets some of the poorest people, especially those at the end of the supply chain, are paying the highest prices for petroleum products, whose quality and availability are not guaranteed. There is interest across the countries, the donor community and investors to study the status of this sector more, to leverage good practices to bring efficiencies to the sector,” he said.

According to the study, the legal, regulatory and institutional framework needs to be strengthened. Except for Senegal, the study recommends the reinforcement of legal and institutional frameworks in all West African countries.  Meanwhile, the study further says, Eastern and Southern Africa have weak enforcement and policing mechanism, except for South Africa and Botswana, which need to be boosted to keep oil product prices low.

On the aspect of supply, procurement arrangements and infrastructure, the report says, Cote d’Ivoire, Senegal, Kenya and South Africa have refineries and produce oil products. These countries supply neighboring countries with oil products, but protect their domestic refineries from competition.

Regarding pricing and taxation, the study says eight countries have price controls, including all five countries in West Africa. These price controls systems range from those automatically guided by pre-established administrative procedures, to those where interventions are more ad hoc and/or politically motivated. The study indicates regional price variations in all countries, with the exception of Madagascar which has a uniform price throughout the country.  The study also proposes a comprehensive regional oil information database maintained by African oil regulators. 

The study was sponsored by the Energy Sector Management Assistance Program (ESMAP) and supported by a number of donors and international organizations.  The study was carried out alongside the Sub-Saharan Africa Refinery Sector Study also funded by ESMAP.  The first Refinery Sector Study reviewed the impact of transport emission on human health. Meanwhile, the other Refinery Study outlined the upgrades necessary in the African refining sector to respond to global market and clean fuels trends. 

A detailed study is now published.