Robert Buddan
BOB WOODWARD'S book, Plan of Attack, published earlier this year, said the Saudi Ambassador to the United States promised George Bush that Saudi Arabia would lower oil prices in time for the November elections. There are signs that this is happening.
Even so, our region cannot allow itself to be subjected to the personal and ideological politics of the U.S. and Middle East as has been the case for 30 years.
Don Harris' study of 1997 found that across the board of his sample, private sector leaders in Jamaica identified energy costs as the most serious cost affecting competitiveness. The Caribbean relies on petroleum for over 90 per cent of its energy.
OIL DEPENDENT
Our major regional competitors are Trinidad and Tobago (T&T) and Barbados.
T&T is the Caribbean's leading oil and gas producer and one of the major natural gas development centres in the world.
Oil and gas are at the centre of Trinidad's manufacturing strength in steel, fertiliser and petro-chemicals. Cuba and Barbados are the only other Caribbean countries with some oil and gas reserves. But they remain net importers for most of their energy needs.
Trinidad will continue to compete well. It is the largest exporter of liquefied natural gas (LNG) to the U.S., exporting more than Qatar, Algeria and Nigeria combined. LNG will become its main export over oil in the years ahead.
The rest of the region is oil-dependent and countries get by through different means. Barbados, the Dominican Republic, Haiti, Cuba, Suriname, St. Vincent and Jamaica are parties to agreements with Mexico and Venezuela to supply crude oil under favourable terms.
Puerto Rico and the Dominican Republic import liquefied natural gas from Trinidad for power generation. Jamaica is exploring the use of LNG and other energy savings measures.
At the beginning of May 2004, the UNDP signed an agreement with CARICOM for the Caribbean Energy Renewable Development Programme. Jamaica and 16 other Caribbean countries are covered. The plan is to make the air cleaner (by reducing carbon emissions) and make access to electricity cheaper.
FINDING ALTERNATIVE SOURCES
The fact is, however, that we will continue to be energy dependent price-takers. We must go beyond energy conservation to finding our own renewable and alternative energy sources.
Secretary-General of CARICOM, Edwin Carrington, said that renewable energy technologies will provide at least 10 per cent of the region's commercial electricity by 2015. This will still not be enough.
At present ,only the Dominican Republic, Cuba and Jamaica have exploited renewable energy sources ((hydro, geothermal, solar, wind, wood and waste). We must exploit them even more. The seriousness of energy crises show that far more is needed.
In 1973 and 1980/81, two oil price shocks shook the Jamaican economy. In the years between 1981 and 1998, world oil prices steadied down. But rising prices now threaten the expansion of the world economy, the expansion which drives our bauxite/alumina industry. The region has to get together to increase oil exploration, increase the use of LNG, and expand the use of renewable energy technologies.
Energy prices have hurt our balance of trade. In the 1970s and 1980s, the preferential price earned for a ton of sugar could pay for 100 barrels of petroleum.
At the present price for sugar (in the absence of preferential rates) and at the present level of oil prices, one ton of sugar can only pay for five barrels of petroleum.
The impact on agriculture and manufacturing has been severe for us and for all small, oil dependent Caribbean countries. They have been forced to shift to tourism. Oil price increases, removal of preferential markets, reduction in development aid by 50 per cent, and the 9/11 shock to regional tourism have all hurt the balance of trade.
These developments have conspired to make the unit value of seven of the Caribbean's 11 most important exports decline and the region's trade deficit has almost tripled because of the loss of preferential markets and the rise in oil prices. The cost of food imports in the region has increased by nearly 50 per cent in the last 10 years. The volatility of the price of petroleum has had a disruptive effect on the region's economies. Four years ago, budgets were being calculated on US$25 a barrel price for oil. A few months ago our budget was being calculated at US$33.40. Today, a barrel costs US$40.
How can the region restore its balance of trade? The Latin America and Caribbean region has energy resources to more than meet its needs. We are an oil sufficient region. But energy sources are unevenly distributed among countries. What is needed is a collective regime that evens out demand and supply.
Bobby Pickersgill once said, "Latin America and the Caribbean are not sufficiently teamed together to benefit from the levels of market development and regional integration which may be obtained from energy cooperation." That is the core of the problem.
STRATEGIC RESPONSES
CARICOM countries will benefit from cooperation. Venezuela is the fourth largest oil producer and needs CARICOM in its diplomatic efforts to balance against the power of the U.S. As a result, Guyana and Venezuela have resolved a territorial dispute by agreeing on joint exploration for oil in the Essequibo. Guyana could well strike it rich.
Trinidad has always seen itself to be in competition with Venezuela for influence in the region. It wants to corner the regional market ahead of Venezuela and Mexico and so it is the first to market LNG in the region. Patrick Manning, the country's prime minister, announced in 2003 that he wants to sell LNG to the region via an undersea pipeline. This would cut energy costs by 30 per cent. This project would take three years and studies are being conducted.
There is another vision in CARICOM. This is to develop a region of sustainable energy nations. St. Lucia's Prime Minister, Dr. Kenny Anthony is the first to commit his country to develop an economy based on sustainable energy. Jamaica has not gone so far but it did commit itself to renewable energy as the means to control greenhouse gases and global warming. Jamaica phased out leaded gasoline in 2000, three years ahead of schedule as part of this commitment.
RENEWABLE ENERGY
The idea of sustainable energy nations is interesting considering the Caribbean's natural environment. Dr. Al Binger has studied the applicability of Ocean Energy Conversion Technology systems to the region.
The 43 small island developing states (SIDS), which include Jamaica and the Caribbean, have small land areas but 20-25 per cent of the world's oceans in their exclusive economic (ocean) zones. Blessed with sunshine, the seas absorb enough solar radiation equivalent to about 25,000 to 30,000 barrels of oil on a daily average per square hectare. The Caribbean is ideal for thermal energy conversion.
There would be spin-offs for food production. Fresh water could be discharged for agriculture. A study by the UWI's Centre for Environment and Development showed that gross return per unit of land used for mari-culture would be much greater than what is earned from banana and sugar exports.
John Wittingham says that the northeast trade winds provide a stable wind system. Wind farms can reduce costs. It is the cheapest source of electricity on many Caribbean islands. At present, oil prices, wind machines would produce electricity at lower cost. Private industry has an opportunity to compete at lower cost if companies install wind turbines on their premises.
Solar energy is natural for the Caribbean islands. By 1997, Barbados had 23,000 water heaters installed in homes. Solar crop dryers are used and old sugar cane windmills were being revived for generating electricity.
According to UWI lecturer in Trinidad, I. Haraksingh, the Caribbean is endowed with untapped renewable energy sources. Solar hot water systems for large hotels and large apartment complexes should be installed.
One audit showed that Caribbean hotels could save at least a third of their energy through solar water heating and greater energy efficiency.
It seems sensible to track the technology that can make us convert water, wind and sunlight to energy use. This is where the future of Caribbean competitiveness lies.
Robert Buddan lectures in the Department of Government, UWI, Mona. E-mail: Robert.Buddan@uwimona.edu.jm
