Turning Pain at the Pump into African Prosperity

Jun 27th, 2008 10:08 AM UTC
By Ben Hubbard

With gas prices rising to record levels and showing no signs of slowing, energy security is quickly becoming the number one election year issue. Yesterday alone there were at least three press conferences on Capitol Hill from party leaders on the issue of high energy costs. But amid the finger-pointing and searching for quick fixes, there’s a quiet effort underway in Congress to promote US energy security while also fostering stable, long-term relationships with resource rich African countries. Few people realize that 22 percent of US crude imports came from Africa in 2006. That’s slightly more than we imported from the Middle East in the same year.

Yesterday morning I attended a hearing by the House Financial Services committee, chaired by Congressman Barney Frank, on the Extractive Industries Transparency Disclosure Act (EITD), a bill that would require oil, gas and mining companies to disclose their payments to foreign governments. It’s an important first step in promoting transparency and accountability in resource rich countries, many of which are the poorest and worst governed countries in the world. Mandatory disclosure of payments has several benefits:

1. It promotes US interests by combating corruption and improving the stability of US investments abroad through improved governance in oil producing countries.
2. It’s an important poverty reduction tool, enabling oil revenues to be managed in a more accountable manner. Citizens in poor countries will be able to hold their recalcitrant governments accountable for the revenues they received from public concessions.
3. It helps investors assess the risks of their investments in what are often high-risk operating environments (in fact, the Financial Services Committee heard from an investment industry spokesman who endorsed the bill wholeheartedly).
4. It protects companies from false or unfair accusations and blame shifting by host governments. Citizens will be able to clearly see how much companies are paying and how little benefit they are receiving.
5. Finally, for all the pain we’re experiencing at the pump, we shouldn’t forget that soaring commodity prices represent a tremendous opportunity for African governments to convert natural resource wealth into poverty-fighting investments for their people. Transparent disclosure of extractive payments can encourage this kind of responsible use of revenues.

Since the bill requires all oil, gas and mining companies listed on the Securities and Exchange Commission (SEC) to disclose payments, it includes more than just US companies. In fact, fourteen out of the fifteen oil and gas companies that are publicly traded would be covered by the bill, including all three major Chinese oil companies that are active internationally. Since a vast majority of internationally competitive companies would have to report payments, US companies would not be put at a competitive disadvantage.

The bill has a long way to go before becoming law, but judging by its positive response this morning, it appears to be off to a good start. For more information and to keep track of the bill’s progress, check out www.openthebooks.org.

-Ben Hubbard

TAGS: Rep. Barney Frank, U.S. Legislation