Turning crude into growth: Leveraging comparative advantage in oil economics

By Michael Osei AKOMEA

Ghana’s oil wealth is more than a resource; it is a strategic economic asset whose value depends on how it is integrated into the fabric of national growth and industrial transformation. To move beyond extraction toward sustained prosperity, Ghana must harness the principles of comparative advantage, structural transformation and prudent macroeconomic management.

Ghana began commercial oil production in 2010 with the Jubilee field, and has since added production from the TEN and OCTP offshore hubs. Current production hovers around approximately 180,000 barrels per day as of 2025, a meaningful output but modest relative to larger producers.

Despite this, Ghana remains a net importer of refined petroleum products, exposing the economy to global price volatility and inflationary pressures, a recurring challenge during commodity price shocks. Meanwhile, crude petroleum accounted for roughly 19 percent of Ghana’s total merchandise exports in 2023, highlighting its importance to trade revenue, though it still lacks value addition. Ghana also maintains a sovereign wealth mechanism, the Ghana Petroleum Funds, comprising the Stabilisation Fund and Heritage Fund, which held about US$1.4billion by the end of 2024, representing prudent efforts at saving and shielding the economy from price shocks.

At the heart of this discussion is the economic concept of comparative advantage; that countries should specialise in producing goods or services that they can make more efficiently relative to others. In oil economics, this principle guides the architecture of growth. Instead of exporting raw crude with limited value addition, Ghana can specialise in segments of the energy value chain such as refining, petrochemical integration and energy-intensive industrial clusters. This is consistent with Heckscher-Ohlin theory, which links trade advantage to factor endowments — here, natural resources combine with human and capital investments. Yet, many resource-dependent countries fall prey to the resource curse or Dutch Disease, where a focus on raw commodity exports distorts the economy and crowds out other sectors. Ghana faces this challenge when it exports crude, but imports refined products. To avoid this trap, a structural transformation agenda is needed; one that channels oil income into industrial capital, human skills and infrastructure, rather than consumption alone.

The United Arab Emirates (UAE) offers one of the most striking global examples of converting hydrocarbons into holistic growth. Abu Dhabi, which holds a majority of the UAE’s oil and gas, including about 9 percent of the world’s proven crude reserves, has built a diversified economy where non-oil sectors now contribute roughly 74 percent of GDP as of 2023. The UAE strategy demonstrates key economic principles in action. Sovereign wealth funds invest resource rents globally rather than spending them domestically in ways that fuel inflation. Diversification into logistics, finance, tourism and technology buffers the economy against oil price cycles. Human capital and institutional maturity are prioritised, not merely extracting oil, but using it to catalyse broader economic activity. These approaches align with growth models like Harrod-Domar, which emphasise capital formation as the engine of economic expansion.

To deepen the policy logic, several well-established economic models provide guidance. The Heckscher-Ohlin framework shows how Ghana can leverage its natural resources and emerging skilled sectors to expand into refined products, industrial inputs, and export-oriented energy services.

The Dutch Disease framework underscores the importance of managing exchange rates and balancing domestic industry growth to avoid over-reliance on volatile commodities. The Harrod-Domar Growth model highlights the importance of investment in capital stock here, investing oil rents into refineries, manufacturing and infrastructure, resulting in cumulative growth multipliers.

Resource curse mitigation strategies, including transparent governance, strategic saving via the Ghana Petroleum Funds and diversification, reduce macroeconomic instability and enhance resilience against oil price shocks. These models do not merely diagnose problems but provide a roadmap for policy design, where crude is converted into productive capital and economic opportunity.

Imagine Ghana reallocating part of its oil income toward modern refinery and petrochemical complexes, enabling export of higher-value products rather than raw barrels. Export-oriented energy industries could supply West Africa with refined fuels and industrial feedstocks. Investments in renewables and energy storage could allow Ghana to leapfrog into future energy markets. Such a strategy would not merely increase GDP but could reshape the industrial landscape, creating jobs, boosting exports and stabilising foreign exchange flows.

Oil is not wealth by virtue of existence; wealth is only realised when resources catalyse transformation of industry, human capacity and institutional strength. The question for Ghana is not whether it has crude, but whether the nation will use its comparative advantage to drive structural growth, just as leading global producers have done by layering value chains, diversification and disciplined economic management.

In an era of fluctuating energy markets, Ghana’s ability to translate its oil into long-term growth defines not only economic outcomes but the very character of national development

Michael Osei Akomea, Ch.Pe is a Petroleum Economist.

 

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