Now is the time to hedge oil, Nigel

Monday, May 14, 2018

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Dear Editor

Dr Peter Phillips created the Energy Stabilisation Fund in March 2015. The estimated cost of this oil hedge contract was $9.5 billion. It was ended by the Andrew Holness-led Administration.

I supported the Holness move because the circumstances for hedging oil back then was foolish. Oil price projections remained low and stable. As a result, I then and still believe we had wasted $9.5 billion or more had Holness's Administration decided to extend the contract.

Now, however, post-US President Donald Trump's Iran deal exit, oil price projections are edging upwards at a quicker pace. The recent Iran and Israel military engagement may well also result in higher oil prices.

Before those concerns, the cost of oil was going up due to a drop in production. Add to that the Venezuelan crisis and Trump's sanctions.

So, my humble advice to the present Government of Jamaica is that now is the time to hedge oil before it's too late. When Trump hits tough sanctions on Iran it will sting and at that time not even the European Union can save them.

The wise change when circumstances change, while the unwise stick with the same opinion despite changing circumstances.

People with understanding know why hedging oil is necessary now and not three years ago.

If the cost of oil is increasing dramatically the Finance Ministry needs to have a look at lifting the burden off petroleum users. Therefore, Minister Nigel Clarke will need to look at the Special Consumption Tax on fuel with a view to decrease it.

Let's act before the conditions get tough and unpredictable.

Teddylee Gray

Ocho Rios, St Ann

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