World Bank warning v. Jagdeo’s prediction

Nov 10, 2024 Editorial, News

…Editorial

Kaieteur News- Guyana’s leading oilman, Vice President, Bharrat Jagdeo stated his position clearly. The decision has been made by the PPP/C Government to forego some possible additional oil revenues today, so as to position Guyana to maximize its oil revenues in the future. He used his oil revenue maximization predictions to justify not ring-fencing oil projects currently in operation. For Jagdeo’s predictions to happen, it meant that a series of related oil factors must all be in sync, with little room for deviation. The World Bank has just issued its Commodities Market Outlook, which is at odds with Jagdeo’s revenues predictions, puts them under some pressure. According to the World Bank, their estimate is for an oil glut in 2025. This just put what Jagdeo predicted under some stress, if not a little disarray. It is not as neat as that promise he made to Guyanese, when he called upon them to make a sacrifice now, so that they can get more later.

Oil supply is estimated to exceed daily demand by 1.2M barrels. Though 1.2M barrels does not seem to be such a big increase in the general supply picture, it is enough to have some impact on oil prices. The oil market is tight, and any change in a key variable such as daily supply impacts the overall sentiments in the always volatile oil market. Oil-producing countries that once cooperated can find themselves competing against each other for market share in 2025. Oil prices have hovered around the US$80 a barrel range for a few years now, with only the occasional blip. In the highly competitive oil markets, all it takes is one blip to start a price slide that has some staying power.

The huge Chinese economy has not been performing at its best. Also, the conquest of Donald Trump in the US presidential election may not be the best thing for the Chinese economy. His policies could add further distress to an already faltering Chinese economy when it could least roll with such punches, if they were to come. China is an oil guzzler, one of the biggest, so any slowdown, there could have a ripple effect that lessens daily demand and add to the effects of the World Bank’s excess supply scenario. Further, more oil from non-OPEC + countries could make a tricky situation a bit more precarious. Other contributors on the wrong side of the supply equation could have their part to play. These include overproduction by OPEC+ nations (an old concern and problem of cartel members) and more enthusiasm for electric vehicles.

All of these could create some disturbance with Jagdeo’s own predictions pertaining to future oil revenues. Whatever he has committed to ExxonMobil behind closed doors, while rejecting ring-fencing calls in favour of more future oil revenues will now have to be revisited. The level of demand may not be there for Guyana’s oil.

The price per barrel on which he may have based his predictions would very well have evaporated, given the excess daily supply. To make up for their own revenue shortfalls, oil-producing countries with the spare inventory or capacity may produce more barrels of oil daily, which is to the disadvantage of Guyana. In no time, this could turn into a rout with prices sliding ever downward, and for an extended period. This has been part of the boom-and-bust history of oil and its prices, with many oil-dependent national economies sent reeling.

For a young oil-producing nation like Guyana not to ring-fence its oil projects now, but depend on future oil prices remaining steady always amounted to a roll of the dice in some ways. Under Jagdeo’s bright-eyed oil revenue maximization predictions, Guyanese could end up losing corn and husk. No ring-fencing today leaves Guyana shortchanged, while hoping for the best may turn out to be what leaves Guyanese emptyhanded, as in lesser than before. Ring-fencing has its vulnerabilities, but it is the closest to a sure thing as can be today. Hoping in oil prices staying high in the future has too many variables that can dash Guyana’s hopes, outside its control. More money later is Jagdeo’s latest pig-in-a-bag to get the better of Guyanese.

(World Bank warning v. Jagdeo’s prediction)

Bharrat Jagdeo, Editorial, Oil revenues, Oil-producing countries, Vice President

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World Bank warning v. Jagdeo’s prediction

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World Bank warning v. Jagdeo’s prediction

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