Jamaica saves $30b on oil imports
Jamaica reduced its oil import bill by US$242 million ($30 billion) last year, which helped to slash the trade deficit by nearly nine per cent, according to new data from Statin.
Motorists are, however, only partially benefiting from the price drop due to two sets of fuel taxes imposed in 2015 and 2017.
Oil imports categorised as mineral fuels fell by 20.6 per cent to US$935 million between January to December from $1.17 billion spent a year earlier, stated Statin.
"This was due to lower imports of petroleum oils, Bunker C grade fuel oil, automotive diesel oil, motor spirit (gasolene), propane, and butane," the data agency said.
The overall trade deficit shrank to US$3.55 billion for the calendar year.
During 2016, the average West Texas Intermediate (WTI) oil prices declined by 11.3 per cent to US$44.5 per barrel.
Currently, oil prices are hovering around US49 a barrel, still below the average US$100 a barrel for much of the decade. Last week, Fadel Gheit, a noted oil analyst with US-based investment firm Oppenheimer, told Jamaican securities dealers that oil should trend towards US$60 and remain there for the foreseeable future.
Gheit said that the growth in US shale oil production and record production by the members of OPEC, led by Saudi Arabia, have significantly reduced the returns to the sector. As a consequence, the sector will seek to go from its current state of break-even at about US$50 a barrel to making an economic return, but not far beyond that level. Shale or clay-like rock that generates oil and gas changed the energy outlook, creating the 'shale revolution'. Gheit said that the shale revolution added resources to the global supply, which would reduce the world's reliance on the oil cartel OPEC and would therefore, mitigate against the return of US$100 a barrel oil.
The Bank of Jamaica noted in its Fiscal Stability Report released last week that one aspect aiding the 2016 price related to OPEC.
"The moderation in the oil price trend reflected the anticipated signed agreement among OPEC members and other major producers to limit supply," stated the central bank.
DECLINE IN TRADE DEFICIT
Jamaica's trade deficit for January to December 2016 was US$3.56 billion. This represented a US$345 million, or 8.9 per cent, annual decline.
Jamaicans spent US$4.75 billion on imports, compared to US$5.16 billion a year earlier. Exports dipped by 4.8 per cent by US$60 million to US$1.19 billion.
Jamaica recorded an improve-ment in the trade deficit with the United States, its main trading partner, by 12.3 per cent to US$1.35 billion, moving from US$1.54 billion during 2015.
Globally, the imports of 'manufactured goods' fell by US$76 million to US$571 million last year, while food purchases declined by US$2.6 million to value US$840.9 million.
Traditional domestic exports valued at US$626.7 million in 2016 fell 8.1 per cent from US$765 million the previous year.
This was due to declines in commodity groups mining and quarrying and in manufacture, said Statin.
Meanwhile, non-traditional domestic exports at US$463.9 million increased by 6.3 per cent from 2015.