Kenya has discovered its first oil well, but it could prove as much a curse as a blessing.
Kenyan President Mwai Kibaki announced last week the discovery of an untapped well in the northwestern Turkana region of the African nation.
President Kibaki hailed the discovery as a “major breakthrough” and said he hopes to make his country into an oil producer in the next few years.
While an oil discovery might seem like a windfall for a country, history has shown many oil nations struggle in handling their new wealth and global relevance.
Oil-rich regions such as Nigeria and even Louisiana have experienced the ups and downs of what has been coined the “oil curse,” which refers to how nations with large quantities of oil tend to develop more slowly and experience less overall economic growth than similar nations without these resources.
Oil has a tendency to dominate the economy of any oil-rich nation since the resource is in such high demand throughout the world. The success of the oil sector in a country, especially one without other strong industries, tends to muscle out other economic areas.
As soon as a nation starts selling oil, other nations will start buying it. This results in an inflow of other currencies into the oil nation, increasing the value of its own currency on the world market.
This currency appreciation seems like a good deal, but it actually results in the increased costs of other goods, such as agricultural products, making them less desirable than those of competing countries, greatly hindering non-oil industries.
The concentration of wealth in the oil sector also encourages corruption in the government as a small group of individuals often sells the resources and interests of their population to the highest bidder.
Kenya must be vigilant in the management of its newfound oil wealth if it hopes to avoid the fate of Africa’s largest oil producer ­- Nigeria.
Nigeria’s economy is dominated by the oil industry, making up nearly 40 percent of its gross domestic product. The nation also faces constant health and environmental disasters as a result of oil production.
The Nigerian National Petroleum Corporation estimates more than 14,000 barrels of oil are spilled in the nation annually, with an average of 300 spills per year. According to the World Bank, this estimate ignores “minor” spills, which means the total could actually be about 10 times more than that.
The total amount of oil spilled in Nigeria since 1960 has been estimated between 10 and 100 million barrels, roughly two to 20 times the amount spilled by the Deepwater Horizon in 2010.
Louisiana most recently felt the oil curse after the BP disaster, but the state has had longstanding issues handling its oil, such as corruption in the state government and enviornmental devastation.
Former Gov. Huey Long took full advantage of the state’s booming fossil fuel industry to entrench himself as a political power by spending oil revenue on massive public works projects. Long proceeded to dominate politics in the state, far exceeding his powers as governor and cashing in the goodwill he purchased with oil money.
One nation that seems to have avoided the oil curse in the face of a massive discovery is Norway.
The Scandinavian nation has managed the North Sea oil by fighting the urge to cash in on its reserves and has instead taken a long-term approach. Oil is extracted relatively slowly, and the revenue is deposited in a trust fund. The government is only permitted to spend the interest generated by the fund, a decision made to preserve the nation’s economy and democracy.
Kenya will need to follow a similar plan if they hope to avoid the oil curse and break the cycle of corruption and exploitation plaguing so many oil producing nations.
 
 
Andrew Shockey is a 21-year-old biological engineering junior from Baton Rouge. Follow him on Twitter @TDR_Ashockey.
 
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Contact Andrew Shockey at [email protected].