Business Page  Cheap oil is dead- conclusion

Sunday, October 2th, 2005



Today, against the background of the dramatic removal from Buddy's Farm on the East Bank of the Demerara River of critical criminal evidence involving the illegal importation of fuel in Guyana, we conclude our series on an energy crisis that is different from all the previous crises that have gone before. As everyone but those who hold political responsibility for conceptualising and implementing an energy policy seems to recognise, the current rise in oil price is not a spike but a market adjustment that raises the bar as never before. Even President George Bush, himself a Texan oilman, has now come to realise the gravity of the situation, calling for conservation measures among his staff and Americans in general.

Eleven years after the submission to the Office of the President of a draft document entitled 'Energy Policy of Guyana' by an Energy Policy Committee we are no closer to a long-term solution to our energy problems. We now have a Guyana Energy Agency, we have a marking system for fuel and we have electronic camera monitoring in the Guyana Revenue Authority. But yet we have the brazen removal of police evidence from a crime scene, blatant smuggling and sale of fuel alongside the Essequibo River which only the blind or the corrupt cannot see and no electronic monitoring of the locations which have been associated with smuggling. As if this is not bad enough, we hear of disturbing reports of these very persons enjoying close relationships and contacts with senior ruling politicians.

Eternally hopeful:

Drawn up more than eleven years ago, the energy policy which appears never to have been finalised surely needs serious revision while Cabinet's response to the crisis is to set up another committee with very vague terms of reference that derogates from the responsibility of the GEA. Recently and mainly in the letter columns of the Stabroek News there have been a number of very useful contributions and recommendations on the debate, but alas none from those who are in the position to do something about the escalating crisis.

It is becoming less likely that we will find any time soon the oil which has for decades tantalisingly eluded us after so many promising starts, most recently the attempts of On Energy in Berbice. The hope which springs from the logic that reasons if our neighbours have oil then so must we, has perhaps made us lose sight of the vast opportunities for alternative energy sources which exist. We have to start now, but the question is where and how? The GEA has been forced to spend much of its time and resources chasing after illegalities in the fuel importation and distribution system, and now we hear of jurisdiction problems, overlapping responsibilities and administrative confusion in who is responsible for what in regard to fuel. Confusion provides administrators with easy excuses and opportunities for assigning blame and responsibility to others.

Do something - set up a committee

The first step therefore is not the setting up of a toothless amateur committee guaranteed to fail, but to provide the GEA with the mandate and the resources to develop a real policy paper that addresses the short, medium and long-term solutions to the problems. This has to be a serious exercise with the best available brains applying themselves, not to theoretical possibilities, but to practical and appropriate realities. To say that that is a task that ought to have been undertaken several years ago is merely to say to the politicians that we do not have a minute to spare. Let us begin now.

We also need to avoid the costly and tragic mistake of timidity and paralysis that so often leads us into thinking that nothing can be done. Faced with escalating oil prices, our manufacturing sector is finding it increasingly difficult to compete with regional producers, and only immediate action can bring any relief. The cost of electricity is now prohibitive, not only for businesses but homeowners as well, while the cost of transportation acts as another disincentive to work. In considering short-term, cost-reduction possibilities for these groups we need to look at the pricing structure of the product in the international marketplace and examine whether we purchase our products at the most favourable prices and on the most favourable terms. Oil has always been stuff of oligopolies with its history well told in the 1975 book Seven Sisters by British journalist Anthony Sampson - still regarded as one of the best written books on the industry.

We need to examine any residual anti-market practices by the oil companies operating here and to consider the imposition of some form of margin controls on the oil companies. For those who tell us we cannot do so, including the new colonialists under the misleading label Washington Consensus, let us remind them of the history of Standard Oil in the USA.

The government also needs to review its policies on fuel concessions to some of the larger companies and in certain industries which are inappropriate for this era and are costly to the economy. Similarly, its policy on duty concessions on vehicles should take account of fuel efficiencies which should be rewarded, as inefficiencies should be penalised. There is much that the government can and must do if it wants to minimise the current burden while a longer term fundamental strategy crystallises.

Paradox and waste:

One of the paradoxes of this country is that despite its poverty it is wasteful and extravagant and refuses to act as its economic state would demand. We complain about our electricity bills but do not bother to turn off electric lights, televisions, computers, etc, when not in use.

We inefficiently run appliances when not necessary and use our vehicles and travel long distances with little thought of the costs and consequences. Speeding is not only unlawful but also energy-inefficient - let us hit two birds with one stone. Some of the short-term remedies lie in life-style changes at all levels in the society, but certainly those who use most can also save most.

It is regrettable that line losses at the Guyana Power & Light Inc, the country's major user of fuel have not been reduced, something which is partly responsible for 40% of production being wasted. A former Chairman of the GPL estimates the total annual wastage of petroleum products by GPL at US$9M for year 2005, a staggering figure that cries out for urgent action by the government and the utilities regulator, particularly since the company has been unable to deal with it. Had the necessary resources been applied to this problem some ten years ago, not only would the investment have more than paid for itself by now, but it would not still be a problem. As it is we now at best have to treat it as a medium/long-term solution!

Medium and long-term action:

Medium-term policies and action should involve partnership initiatives of the government and the business community in which fiscal incentives can play an important part. There are alternative energy sources that are well developed and where the available technology would fit well with our resources, environment and circumstances. Solar energy, bagasse, wood waste, fuel wood, rice husk and biogas offer major and immediate commercial opportunities waiting to be exploited.

It is vital for the future of this country that we consider alternative sources of energy, not only because oil is not likely to return soon - if at all - to anything like US$25 per barrel, but because we are dealing with a non-renewable resource which is being used up faster than we are finding alternative