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Energy Prices at All-Time High

Contact: George Jude

Friday, May 28, 2004 - OECS member-states are keeping their eyes on world market prices for oil and have warned that should prices continue to escalate, they will have no choice but to review energy prices across the sub-region.

The energy issue was one of the urgent topics discussed the OECS’ 39th Summit in St. Vincent and the Grenadines.

According to the Communique issued by the OECS Secretariat following the summit, the Heads of Government, gathered in Kingstown from May 20 to 21, “expressed their deep concern over rising oil prices and signalled that they may have to consider a review of energy prices at this time.”

The OECS leaders “recognized that any increase in energy prices would pose serious threats to the economic recovery of the sub-region and that this in turn would impact negatively on their capacity to compete effectively in the international marketplace.”

The Heads of Government “agreed to the establishment of an OECS Task Force on Energy Policy to advise on, among other things, effective energy conservation management, alternative energy sources and reform of the sector.”

St. Lucia’s Prime Minister Dr Kenny D. Anthony says the volatility of the international market prices for oil could force St. Lucia and other Eastern Caribbean states to review their energy prices at this time.

The Prime Minister’s comment comes at a time when, at both the international and Caribbean levels, governments and economies are feeling the hard bite of the harsh reality of the increases in world market prices.

Price increases recently hit a 30-year high in the USA, resulting in some states having to resort to steep increases at the pump. The same stands for Cuba, where prices have increased by some 20% in recent times.

Several Caricom economies are already reeling under pressure from the sharp increases in the price of oil on the world market in recent weeks.

The Government of Barbados last week announced it will have no choice but to raise energy prices. The island’s Minter of Energy, Anthony Wood said the local prices for gas and other petroleum products will have to be increased and there would consequently be a “price adjustment” for these products on the local market.

Mr Wood said the government would not be able to absorb the increased prices due to the magnitude of the cost.

Dominica has already been forced to increase the price of gas to the pump. In April, that country’s government announced its third hike in petroleum prices in six years and the second in four months.

Jamaica has also announced it will be forced to follow suit, given the potential implications for that country’s economy.

Guyana recently announced what the government described as “a temporary relief” on gas prices, but said it too would have to allow “the strength of market forces” to dictate the pace of prices for gas and other petroleum products on the local market.
The member-states of the Organisation of Easter Caribbean States (OECS) are all vulnerable to the spiralling oil prices, with several states fearing they may have to go Dominica’s way sooner than expected.

In St. Lucia, where the price of gas at the pump still stands at $7.75 per gallon, the government has shielded consumers from increases in gas prices through a policy of subsidizing the increases and guaranteeing petroleum dealers certain minimum returns on their business.

The government’s subsidy over the years has cost over $5 million. However, the latest sharp increases, which have seen prices sky-rocketing at an unbridled pace, have resulted in pressure on those Caribbean countries that have been subsiding oil prices over the years when prices were more stable.

In the case of St. Lucia, the recent increases have already resulted in a so-called “Nagative Tax,” resulting in the inability of the island’s revenue authorities to collect any taxes on petroleum products imported. As a consequence, Government has had to meet the cost of guaranteeing dealers their minimum profits in the face of what would have been certain losses due to the increased prices.

Dr Anthony, who is also the island’s Minister of Finance, recently announced that “if this situation continues, it can seriously compromise the economic recovery currently under way.”

He said the government would “continue to advocate fuel efficiency and the search for sustainable alternatives, while keeping its eyes on the world market price.”

 

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