Oil money not guaranteed next year- VP Jagdeo

Jan 26, 2025 News

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…says President Trump’s ‘drill baby drill’ policy could cause further decline in oil prices

Kaieteur News- The withdrawal by President of the United States (U.S), Donald Trump from the Paris Agreement and his decision to increase oil production can cause a further decline in oil prices this year, resulting in an uncertainty about the flow of revenue from the sector.

This was recently explained by Vice President, Bharrat Jagdeo during his weekly press conference on Thursday when asked about the implications for Guyana, stemming from Trump’s recent announcement.

The Paris Agreement is an international treaty on climate change that aims to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.”

Following his inauguration on January 20, President Trump vowed to withdraw the US from the Paris climate agreement. The BBC reported that the US will now have to wait a year before it will be officially out of the pact.

At the White House on Monday evening, Trump signed the order to withdraw from the Paris climate accord, including a letter to the United Nations explaining the decision.

He also announced a “national energy emergency” to reverse many of the Biden-era environmental regulations.

Trump called the Paris agreement a “ripoff” during a speech at the Capital One Arena in Washington, DC, following his swearing-in.

“We will drill, baby, drill,” he said earlier in his inaugural address.

Expounding on the implications this may have on Guyana, Jagdeo said, “There is a concern that with increased production in the U.S., there could be an oversupply of the market. That would have an impact on the prices. You have to take account of all these variables when you plan future expenditure.”

The former Head-of-State further noted that this is particularly important since there is no guarantee that oil money would continue flowing.

He reasoned, “That is why our dear friends from the other side, who are pretending as though oil money would always be there, and that it’s guaranteed; next year, it’s not guaranteed. So, if you start telling people you don’t have to work, you can get free money all the time, no country in the world does that and so that is why you have to be cautious.”

Additionally, Jagdeo explained that while there is a possibility of oil prices declining, the new policy could also result in an increased demand of the commodity.

“On the other hand, President Trump is exiting the Paris Agreement and also stopping the renewable energy projects in the U.S. He said the windmill projects and all of the others,” the VP said.

As such, he said that the equation could balance off. He said that the supply of energy would have been enhanced with the renewable sources coming on stream, however with these projects now scrapped, this would trigger an increase in the demand for fossil fuels.

Consequently, the Chief Policymaker for the petroleum sector noted that the U.S oil policy is not a concern, but is being monitored by Guyana. This means not only Budgetary policy but every other related mechanism, the VP said.

Oil prices and Guyana

Kaieteur News previously reported that in 2025, although Guyana’s daily production is expected to climb, the country will see a decrease in earnings from the sector, as oil price is likely to come down by 10.9%.

This was explained by Finance Minister, Dr. Ashni Singh during the presentation of this year’s Budget.

He said, “Oil prices contracted by 2.3 percent to average US$80.7 per barrel in 2024, primarily due to slowing global demand, particularly in China.”

The Minister was keen to note that this trend is expected to continue this year as “crude oil prices are forecasted to decline by a further 10.9 percent to US$71.9 per barrel, with global supply expected to exceed demand.”

This is particularly troubling for Guyana, since policymakers have refused to implement a ring-fencing provision, to ensure the country benefits early on from the wealth generated.

A ring-fencing provision would ensure that after the cost of an oil project is paid off, Guyana would receive 50% of the profits generated by that development, after the operational expense is covered.

In this manner, the country’s take from oil production would increase significantly. Vice President Bharrat Jagdeo previously explained that Guyana would not be implementing a ring-fencing provision, since the country is focused on repaying the investment cost, allowing it to benefit from a “bigger bone” in the future.

He said, “We admitted that we are foregoing revenue now in exchange for massive future income because it’s going into new projects that will increase production and so even with the same share of the 50/50 plus the two percent royalty that the future income, because of the bigger scale will be massive in Guyana’s case and we are deliberately foregoing that in this period for that purpose and then trying to grab this bone now could cause you to lose all the bones, the bigger bones too in the future.”

(Oil money not guaranteed next year- VP Jagdeo)

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• guaranteed, Jagdeo, money, oil, oversupply, price, Trump

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