THE OPTIMISM of group managing director of the Petroleum Corporation of Jamaica, Dr. Raymond Wright that the price of oil will stabilise at about US$45 (J$2,805) per barrel is counter-balanced by his realistic observation - that the age of cheap oil is over.
With oil prices on the world market having climbed steeply from US$22 (J$1,371 ) per barrel in 2001 to today's price of over US$60 (J$3,740) per barrel, some petroleum analysts are forecasting prices as high as US$100 (J$6,234) per barrel in the not too distant future.
This year, for the first time, Jamaica's petroleum bill will exceed US$1 billion. Last year's bill stood at US$934 million (J$58.3 billion) which was 15 per cent of gross domestic product. The national oil bill is consuming 65 per cent of foreign exchange earnings. At present Jamaica depends on oil for 90 per cent of its energy needs and the cost of electricity is directly pegged to the price of oil.
So with the recent warning from the CEO of the Jamaica Public Service Company that escalating oil prices could push the cost of electricity outside the reach of some Jamaicans, the implications of this are stark. A sharp increase in electricity costs will have a ripple effect throughout the economy - affecting production costs and the cost of living.
We note that Dr. Wright has called the private sector to assist the Government in seeking alternative sources of energy. But while it must be conceded that there are potential benefits to be derived from concessionary oil supply agreements like the recent PetroCaribe agreement with Venezuela and its predecessor the San Jose Accord, one of the negative effects of these arrangements is to dampen the urgency of the search for alternatives to oil.
At the same time the search for alternative energy sources is not without its own problems. Ethanol, for example, has been highly touted as a renewable alternative source of energy which is environmentally cleaner than oil. And ethanol production for fuel has been suggested as an alternative use for sugar cane. But a recent controversial U.S. study is suggesting that the energy cost of producing ethanol exceeds the energy output of the fuel.
More immediate to our circumstance must be a serious and aggressive energy conservation programme. The Government has taken steps to improve energy efficiency in several of its own facilities, notably in hospitals. And the incoming president of the 50-year-old Caribbean Association of Industry and Commerce, GraceKennedy's James Moss-Solomon is indicating that his company has implemented energy conservation measures. Many more public agencies and private sector companies must follow suit.
Lower-priced Venezuelan oil and the prospect of Trinidadian LNG notwithstanding, a far more comprehensive and systematic energy conservation programme, from little household to major industry is needed now.
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