EDITORIAL - Prepare for higher oil prices

AFTER what many called the lull, global oil prices have resumed their steady climb back up and they are going to catch some countries that import energy by surprise.

It is not expected that Barbados will be one of them, having already put in place a regime based on renewables to lessen its dependence on imported fossil fuel. So it is hoped that where prices eventually settle, a vibrant renewable energy sector would serve to cushion the effects of the higher oil pries on an economy which is still facing many challenges.

Last month the Governor of the Central Bank of Barbados, Mr. Cleviston Haynes, gave an update on the rising oil prices and their impact on the local economy in 2017. Haynes told a news conference that higher imports into Barbados were driven by a 24 per cent rise in the price of imported fuel products, even as fuel volumes rose only three per cent. For the first half of 2017, imports of consumer goods grew 2.4 per cent although an estimated 7.7 per cent downturn during the last two quarters contributed to an overall contraction in consumer goods by year end. Add to the comments by the Governor, the decline in the island’s foreign exchange reserves continued in 2017, and it becomes clear that Barbados could be in for a rough period once prices remain high.

But the rising price for fuel continues after a relatively low regime of oil prices some years ago, leaving many analysts and global commentators to question whether those prices would reached the US$80 to US$90 a barrel which existed prior to their collapsing to as low as US$30 a barrel.

At this juncture, Barbados has to fast track the renewable energy initiatives so that it won’t be left scrambling with too high a bill to pay for imported crude. It was very noticeable that during the period the oil prices were low, the steam had apparently gone out of the drive to create a robust renewable sector in the country. Some people who had committed themselves to installing the photovoltaics and other systems to benefit from cheaper electricity costs, had slowed their plans, although the more enthusiastic thought otherwise and pressed ahead. These new ventures are located around the country so that with oil prices trending upwards those initiatives are already in place.

This country knows what it is like when high oil prices are bearing down on the economy. Inflation becomes rampant and this is fed through the cost of production in several areas of the economy, thereby making Barbados uncompetitive. Everything from food to clothing, electricity to transportation, recreation and culture costs more. High inflation also evokes demands for pay increases, as the country is seeing from the pay hikes which public officers have been requesting.

In the presentation to the House of Assembly a week ago, the Minister spoke about the new investments which are on the cards for the renewable energy sector. They include one that the Barbados Light and Power Company Limited plans to undertake in St. Lucy, and another a private developer also has for that parish.

Time is of the essence and this country must get moving in that area as soon as possible.