Elizabeth Morgan | Another oil crisis

Following on from last week’s article on war, it is quite evident that it does not aid development. War creates setbacks in economic growth and stifles development everywhere there are active conflicts and tensions. There are also all the spin off problems, which can have global reach. The Ukraine war increased the price of agricultural products (grains, vegetable oils) and energy prices.

Here we are again with the war in Iran. With the US/Israel attack on Iran and Iran’s retaliation firing into the Gulf States and closing the Strait of Hormuz, oil prices have been fluctuating – mostly increasing. It does not matter whether or not a country imports oil from the Middle East, the way oil prices are set impacts all markets. Jamaica is importing petroleum and petroleum products mainly from the USA, Colombia, Ecuador, Mexico, Brazil, Nigeria and Trinidad and Tobago. In 2019, oil was at US$45-US$60 per barrel; in 2022, the price rose impacted by the Ukraine war to about US$101 per barrel and by 2023, it had decreased to about U$82; in 2024, the price further decreased about US$74 per barrel and later to about US$58. Then came the war in Iran and oil prices have been trending upwards reaching over US$100. This is not good news for oil importing countries in the Caribbean. Even Guyana, which is producing oil, is affected as it does not refine oil.

There was optimism that a ceasefire and the reopening of the Strait of Hormuz would stabilise and reduce oil prices. At this moment, however, there continues to be uncertainty as it is not clear whether the US and Iran will return to negotiations or whether US bombings will resume.

Increases in the price of oil means increases in the price of other goods and services, including fertiliser and transportation, and, thus, leads to a serious increase in the cost of living. Countries, including Jamaica, are having to consider measures to reduce oil consumption.

OIL EXPLORATION IN JAMAICA

Recently, there has been encouraging reporting about the possibility of oil reserves in Jamaica’s waters. While this may sound positive, it is a long term projection, a hit or miss. It is unlikely any oil will be flowing soon, even if commercial reserves are identified. This also brings the dilemma of fossil fuels versus climate change.

Climate Change

International scientists are very clear that fossil fuels (oil and natural gas) are major contributors to carbon emissions and climate change. Local environmentalists are pointing to this, suggesting that Jamaica could be arriving late to the fossil fuels party and must take account of the climate change impact. Climate change mitigation and financing are priority issues for Small Island Developing States like Jamaica. Unless a way can be found to effectively decarbonise fossil fuels, the days of their use could be numbered. It is recognised that it would have to be phased out.

It might be recalled that a major sticking point at COP30 in Brazil was on a decision committing to phasing out fossil fuels. This was opposed by the producers of fossil fuels. Of course, recall that the USA has withdrawn from the international climate agreements, promoting increasing oil production, which, by the way, over time, could create a situation of over production and very low prices, which are actually not in the interest of oil producers; this, in addition to further contributing to climate change.

Becoming hostages

Countries dependent on imported oil are now hostages to what is happening in the Middle East. The Strait of Hormuz can be blocked, not allowing oil tankers to leave. Thus, the supply of oil is reduced and the price goes up. The bombing of oil facilities in the Middle East also impacts the supply of oil and prices.

In addition, look at what happened to Cuba! The USA can use its military and other measures to stop much needed fuel from reaching a country, thus crippling the country’s economy. A country has to think about its energy security.

Renewable energy

Countries need to be more self-reliant. It seems that the strategic course of action should be to increase the production and use of renewable sources of energy. Can a country like Jamaica further increase the use of solar and wind energy? Can we not only talk about it, but begin to invest in green technology?

Countries focusing on developing and using renewable energy include China, Iceland, Denmark, Germany, Spain, Uruguay, and Paraguay. There are countries in CARICOM working on solar and geothermal energy. Renewable sources of energy are the way of the future.

CARICOM countries should be further increasing collaboration on energy security and developing renewable sources that are available.

Elizabeth Morgan is a specialist in international trade policy and international politics. Send feedback to columns@gleanerjm.com.