Falling Oil Prices Could Boost Jamaica’s Economy
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Excessively high oil prices have been a severe problem for many nations throughout the world. This is especially true for the developing countries that are dependent on oil to continue thriving. Some exporters have argued, reasonably, that high prices maximize their earnings from a finite resource. For example, in corrupt and mismanaged Venezuela, gas and oil amount to approximately 98% of total exports and 40% of GDP.
Excessively high oil prices have been a severe problem for many nations throughout the world. This is especially true for the developing countries that are dependent on oil to continue thriving. Some exporters have argued, reasonably, that high prices maximize their earnings from a finite resource. For example, in corrupt and mismanaged Venezuela, gas and oil amount to approximately 98% of total exports and 40% of GDP.
In 1973, the producers of oil formed the organization of petroleum exporting countries, or OPEC. Oil prices tripled, leading to a Jamaican recession that has lasted over 41 years. Today, Jamaica is still reliant on oil for about 90% of its energy requirements. Oil accounts for approximately 16% of GDP, and 36% of the total imports.
High oil prices slowed economic growth in Jamaica because high prices increase production costs, raise the cost of living, and trigger inflation. Paying excessive amounts for oil deprives the Jamaican economy because it has less money for other critical needs.
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The History of Oil Prices and the Economy
Between 1986 and 2002, the average price of oil was approximately $18 a barrel. In recent years, prices have increased to over $100 a barrel. Countries capable of exporting oil to other locations around the world have limited their supply to make sure that prices remain relatively high. Environmentalists in America have helped keep these prices high by not allowing America to pursue oil shale and by working to restrict trade with the Canadians. In addition, they block drilling at off shore prospects that would create tens of thousands of more American jobs and help America lower its energy costs. There are even rumors that Saudi Arabia financed Matt Damon’s goofy movie called Promised Land, which came in 2012, which was anti-fracking.
The Rise of India & China
Furthermore, demand throughout the world has kept prices high. Demand has increased by about 50% since 1986. In developing countries, demand for oil has doubled, driven by the economic expansion of countries such as India and China.
Fortunately, oil prices are falling and it seems as though they may ease further in 2015 due to an increased output of gas and oil in the United States because of fracking technology. Fracking allows tapping of shale oil deposits, and this could lead prices lower.
More Supply = Lower Oil Prices
The expected global oil consumption by the end of this year should be approximately 91.6 million barrels per day and the forecast for 2015 elevates this to 92.9 million barrels per day. Global oil supplies should grow by around 1.3 million barrels per day in 2015.
Jamaica Hopes for an Energy Renaissance
Lower gas and oil prices help stimulate economic growth and demand. Experts suggest that this could be the initial step that the global economy needs to ignite a more complete recovery. Of course, if the global economy begins to improve, then the Jamaican economy may also start to make a much-needed comeback. More oil shale development in America may or may not mean more OPEC oil for countries like Jamaica. This would be good for everyone in the world except, perhaps, OPEC. This is just simple supply and demand, which has been a force in economics going back eons.
