Jagdeo is taking us down the same road he curses

Aug 24, 2021 Features / Columnists, Peeping Tom

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Kaieteur News – Trinidad and Tobago’s economy has revolved around oil for the past 70 years. Sugar production would have ended regardless of oil. In fact, it was not oil, which killed the sugar industry in Trinidad and Tobago but other factors.
Trinidad and Tobago’s present economic problems are as a result of underproduction of oil and over-dependence on Natural gas. However, Trinidad and Tobago is still the richest economy in the English speaking Caribbean and its leading industrial manufacturer.
Jagdeo has to be wary that in analysing Trinidad’s problems he does not take Guyana down the very road, which he curses – the route of overdependence. Oil and gas accounts for about 40 percent of Trinidad and Tobago’s nominal GDP. But guess what? Guyana is going to find itself in no different a position in the short term.
The International Monetary Fund projects that oil production is going to account for than 40 percent of Guyana’s GDP by 2024. So is Guyana within the next three years going to suffer from an overdependence on oil production?
The Dutch Disease, which Jagdeo refers to, is said to occur when sudden development leads to problems in the overall economy. But in the case of Trinidad, its economy has been dependent on oil for the past 70 years and this dependence alone does not fully explain the present recession in the twin-island Republic. GDP per capita is almost three times greater than that of Guyana. So for one moment do not assume that Trinidad is a poor country. It may be experiencing difficult economic circumstances but it has not been counted out.
Trinidad’s problems were caused not merely by the decline in oil prices but by the lack of sufficient local production to keep its refinery going. When PETROTRIN was structured, its refinery was producing at one-third of its capacity. And the reason for this was not a dependence on oil but the lack of oil caused by inattention to ensuring new discoveries to sustain production.
Jagdeo has more to fear from this problem because his philosophy can lead to a similar situation as faced by Trinidad and Tobago. Jagdeo is so keen on maximising oil production in the shortest possible time that Guyana may well find itself exhausting its reserves too quickly, thus throwing the economy into a tailspin.
But Jagdeo also misses an important dimension of Trinidad’s economy. For the past three decades, Trinidad has become increasingly reliant on gas exports. The economy moved from being dominated by oil to being dominated by Natural gas at the turn of the century.
In addition, while the decline in oil prices, undoubtedly hurt Trinidad and Tobago’s economy; the decline in Natural gas exports hurt the economy even more. Last year, the country announced a significant decline in Natural gas production. But T&T is hoping for a boost in production in the post-COVID period. But its plans are dependent on new investments.
Guyana too seems to be hedging its future, at least its energy future, on Natural gas. The world however is moving away from this non-renewable source of energy. And so like Trinidad and Tobago, Guyana is taking a big gamble on the development of Natural gas. Not only are there concerns about there being insufficient Natural gas to make the proposed gas-to-shore power plant feasible, but the high costs of pumping the gas from different wells to shore is prohibitive and may well render the entire project riskier than the Skeldon Sugar Factory.
While Jagdeo is nudging Guyana towards Natural gas, the world is moving in the opposite direction. The world is moving away from Natural gas and coal. But Jagdeo is only concerned with the speculation that gas may be the transition fuel in the post-COVID period.
At present, despite the recent rise in the price of Natural gas in Europe, the future remains uncertain. The present rise in prices is associated with the recovery from the pandemic but this will abate within a year or two and once again, concerns will arise about the long-term future of Natural gas. Already such concerns are discouraging new investments, especially in the context of a zero emissions future.
Bharrat Jagdeo was in Washington last week. He must have been sobered by the remarks of John Kerry, former US Secretary of State, who pointed out that Natural gas, was not a long-term solution to help address climate change.
Jagdeo may be leading Guyana into an economic cul-de-sac with his plans for maximising oil production and diversifying energy into Natural gas. If his limited understanding of the causes of the economic decline in Trinidad and Tobago has taught him anything, it should be that he is taking Guyana down the same route which they have gone and the very one which he attributes to Trinidad’s present problems.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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