Falling Oil Prices Are Good For The Pocketbook, But Bad For The Paycheck In The Caribbean
The Petrotrin Oil Refinery in Trinidad
CASTRIES – Small islands in the Caribbean depend on oil imports to generate electricity and consequently have suffered from high energy costs.
For those countries, the dip in oil prices is benefiting both consumers and petroleum dealers.
In fact, consumers are paying some of the lowest prices ever on petroleum products.
“The impact for us in Saint Lucia … we expect the prices of the by-products from crude to come down; that is gasoline, diesel, LPG and the like,” petroleum dealer Everistus Jn Marie said in St. Lucia. “So we’re already beginning to see the effects of reduction in the price of fuel in the local economy. It would be the same for other countries who are dependent on the importation of oil.”
The news is also not good for Trinidad and Tobago. For the last 20 years, that oil-producing republic has enjoyed a booming economy.
The collapse of global oil prices has resulted in the Dr. Keith Rowley-led administration cutting spending by 7 percent and having to tap $1.5 billion from a stabilization fund for the next few years. Its 1.3 million nationals have also been warned that they will have to make do with less.
Yet even as small islands celebrate dropping oil prices they must remember that what affects Trinidad will eventually affect them, Jn Maries says.
“It will have a knock on effect for neighbouring Caribbean islands, who depend largely on Trinidad for some of their imports, regional trade and if you see a decline in the Trinidadian market and economy, it will impact negatively on the other Caribbean islands. We will have to see the extent to which it will affect us negatively. Even regional travel. Trinidadians are perhaps the most traveled Caribbean people and that is going to affect it.”
Most people say that the drop in oil prices was welcome. But for places like Trinidad and Tobago where oil and gas makes up 40 percent of the Gross Domestic Product (GDP) and 80 percent of exports — the feeling is overall is one of unease.
“I think it’s really good, for us at least, but there are some parts of the world that depend heavily on the oil sales,” industry expert Michael Dubois said. “I think it’s all about the balancing (of) world economies. While it’s good for others, it’s not so good for others. Right now, we are benefiting from below $29 per barrel prices for oil, but for countries whose economies depend on the price (of) oil, that’s another story all together. They can’t survive.”
Countries like St. Lucia use a “pass-through” mechanism to set national oil prices. Citizens says it is effective and in times like these, it benefits the consumer.
“If it goes down, based on the landing price, the cost of fuel will go down, I will see that reduction in cost. If it goes up, I will see that increase in cost. So I think it works well and I am pretty satisfied with the price right now,” said Kenson Casimir, a St. Lucian social worker.
According to Trinidad’s Ministry of Finance, the twin island republic receives about 45 percent of its GDP and 80 percent of its export revenue from the energy industry. In its 2015-2016 budget, the government anticipated earning $80 a barrel, but the price per barrel on the world market has dropped below $30 a barrel.
On Jan. 4, the Government of Dominica announced a landmark decrease in the cost of all petroleum products, with gas falling to $3.62 a gallon.
Saint Lucians have been paying around $3.90 for a gallon of petrol. While it is difficult to preempt the price of a product that is subject to fluctuation, regional governments and gasoline importers say prices are expected to remain low for over next few months.
A woman fills up her gas tank in Castries, St. Lucia