Opposition points to looming energy crisis, absence of oil hedge

The Opposition People's National Party (PNP) is concerned that the government could have an energy crisis on its hands with the rising price of oil on the world market and the absence of an oil hedge.

In a release issued today, the PNP pointed to forecast from analysts at Bank of America Merill Lynch for crude oil prices to skyrocket to US$100 per barrel by next year.

This is based on the likelihood of major supply risks in Iran and Venezuela, which are likely to strain global energy markets.

"Jamaica could be heading for choppy waters, potentially facing a challenging combination of rising oil prices but no oil price hedge and no PetroCaribe financing for oil imports (and) there has been no response so far, or even an acknowledgement of the situation, from the Government," the PNP said.

Opposition spokesperson on Finance Planning, Mark Golding, warned that "the 2018/19 budget, formulated on the assumption of an average oil price of US$56, is in danger of being undermined, as the oil price is already significantly above that level and rising".

He added: “The last PNP Administration had the foresight and courage, when oil prices were low, to put a tax on fuel specifically to pay for an oil price hedging programme to protect the country from exactly this eventuality.”

According to Golding, the government has "left Jamaica fully exposed to a very unstable geo-political climate, with no protection from the ravages of an unstable world oil market".

If this trend were to continue, the Opposition said Jamaica’s balance of payments would be affected, putting pressure on the currency and reserves.

It also said inflation would also be impacted through higher transportation costs and electricity prices, adding to the burdens being felt by ordinary Jamaicans.