Falling oil prices: Let’s not become complacent
Like all other countries that rely heavily on oil for energy, Jamaica is breathing a sigh of relief at the decrease in the price of the precious commodity in recent weeks.
Last Friday, oil traded at almost US$61 a barrel, a decrease of 47 per cent from the US$115 high it had got to this year. That decrease, the Associated Press tells us, has removed nearly US$5 billion a day in revenue from the global oil industry. That’s a mind-boggling figure, the loss of which has no doubt upset oil-producing countries.
Already, we are seeing the potentially devastating effects of that loss of revenue. In Russia, the currency has plunged, raising the possibility of a recession that, we are told, could frustrate economic recovery in Europe. In addition, there is now great concern that Venezuela could default on its debt as the price of that country’s bonds tumbled last week.
On the positive side, lower oil prices are helping to boost the economies of countries that import huge volumes of the product, as consumers are paying less for gasoline and, as such, have more disposable income.
On December 3, 2014, we asked in this space are the benefits of lower oil prices being passed on in Jamaica? Regrettably, we have not seen any great downward movement in gasoline prices commensurate with the lower price of oil on the world market.
That disparity forced petroleum marketing companies into a meeting called last week by Energy Minister Phillip Paulwell after public outcry. Coming out of that meeting, the marketing companies said they would pass on the full reduction of weekly refinery billing price adjustments quoted by Petrojam to their retailers.
Why, however, did it have to come to that?
The marketing companies can’t expect to benefit both ways. For, when oil prices soar, they don’t hesitate to pass on the increases to consumers.
Minister Paulwell has assured the country that he has no desire to reclaim the power of price controls as “there is always a place for integrity and fair play”.
We are fully in favour of the market setting prices. However, we hope that the minister would not have to resort to price controls if the petroleum marketing companies quietly start increasing their prices, having endured the initial scrutinity of the public and Mr Paulwell’s ministry.
At the same time, we encourage Minister Paulwell not to relax his efforts to diversify the country’s energy sources. For it has been the practice of successive governments to become complacent whenever oil prices fall, only to start talking forcefully about energy diversification when the prices begin to spiral again.
Jamaica, we believe, has wasted too many opportunities to reduce the cost of energy to householders and businesses. Cheaper energy will certainly play a big role in changing our economic fortunes for the better.