ON THE LEFT: Oil prices posing a big risk
THE PATRICK HANOHAN LECTURE, hosted by the Central Bank recently, predictably, touched on the global economic crisis and the options for Barbados.
As the International Monetary Fund (IMF) came up repeatedly, Hanohan’s experience from riding out the crisis in Ireland left me with a couple of nuggets: have a clear plan and, secondly, communicate that plan to the public to obtain buy-in.
Sadly, we in Barbados do not seem to do either very well, particularly the latter.
For much of last year and months prior, I spent time following crude oil prices and doing some economic data research.
Given the relationship between oil prices, imported volumes and the re-direction of critical foreign exchange to pay for these imports it seemed logical for me to understand both the economic and personal implications.
Simply put, if oil prices rise, more foreign exchange is needed to pay for them and we all, minus the upper middle income folk, would have to tighten already tight belts further.
The volatility of oil prices and absence of trend data led me to the conclusion that the hedging proposal by Barbados Light & Power Co Ltd, the monopoly utility, last year, should be opposed.
And I did, as well as, other intervenors.
I am now convinced I got it wrong as did the Fair Trading Commission, which, unlike me, has the burden of responsibility in deciding such matters. Based on the subsequent oil prices data I have since been able to follow, I do believe we missed an opportunity to reduce the negative impact of oil prices on the consumer.
The price of a barrel of oil has fluctuated in 2017, but in April, we have seen a pattern of increases.
Some analysts forecast higher average prices in 2017 compared with 2016 at more than US$50 a barrel compared with the US$40 range in 2016.
Based on what I have been following, this appears to make sense, heightens the likelihood of negative implications for the island’s foreign exchange and for those at the lower end of the economic chain.
So, is there a medium term plan to address the energy predictability and is it being communicated to the public?
A reduced dependence by everyone on energy, it would seem, should make sense. This does not require a document but basic commonsense based on available data.
We are not seizing the window of opportunity provided by low oil prices to do so with renewable energy and if the oil price forecasts are correct, as I believe they are, that window is closing.
So I return to the commonsense wisdom of Hanoham. Have a plan and communicate that plan to the ordinary citizen, showing them what is their role.
This does not require a document.
It requires solutions, including energy. The very likely prospect of higher oil prices should be a stimulant to consumers and politicians to take urgent action on the sun and wind: the birds in the hand, as against the birds in the bush.
Hallam Hope is a communications consultant.