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Oil trembles
Editorial…
Kaieteur News- The Guyana Government may find it convenient to push that the local economy is diversified, that oil has its role, but that there are other solid contributors. The fact must still be faced that Guyana’s economy has its powerful dependency on King Oil, regardless of what the government sells.
Remove oil from the equation, and many of the limitations of past years that handicapped past governments return. The recent announcement by the US of a range of steep tariffs has sent oil and other sensitive commodities into a swoon. Oil, on which so much hinges, is down, with other commodities falling to four-year lows. Gold has not been spared in the downdraft, even though it is the traditional safe harbour when other prices fall. None of this is healthy for the Guyana economy, or for Guyanese expectations.
It all depends on how long the tariffs last and stay at their punishing levels. Also, it depends on how other countries, reeling from the impact of US-imposed tariffs, respond. China has been quick to bare its teeth with tariffs of its own slapped on all US goods. While the US excluded energy from its tariffs, the Chinese showed their anger and impatience with such finesse and clapped back with their own 34% retaliatory tariff on all US products. To manifest the sweep of its determination, China put some restrictions on exports to the US of some crucial rare earth minerals. It is baffling that the US would think that heavy tariffs could be imposed on China, and that it would sit back and twiddle its thumbs. Two can participate in a trade war, one which could drag in many countries, becoming of global proportions.
While China is in a strong position to react in the manner that it did, Guyana has no such luxury, no such willingness. In many respects, Guyana is held hostage to the whims of the US. The PPPC Government has seen to that, been happy to surrender, so as to secure the ambitions of its leaders. With oil falling, and should it continue to do so and remain so for an extended period, ordinary Guyanese are the ones who will feel the pain of economic constriction. They received less than they should have, while oil prices were high, billions were withdrawn from their Natural Resources Fund, and billions more were borrowed. The government cabal of insiders and favoured who made money are well cushioned to weather the promised storms. Ordinary Guyanese, however, are not insulated from the hammering that is now stirring, waiting to descend on their heads.
The longer that always volatile oil prices tremble, the more Guyanese will feel the brunt of hard times that we hope are not coming, or will be minimal. Once the US digs in its heels for the long haul with tariffs, then sharper retaliations from other countries could become the norm. The outlook for oil in such uncertain circumstances would go from shakiness to grimness. Guyanese will be caught in a trap, from which there is nowhere to run. From prices to prospects, the blows will rain and be felt. A tariff is a tax, and though this country should be favoured with some special considerations (exemptions), the bite will be deep. When local exporters operate at a competitive disadvantage, they earn less, hire less, and buy less. The tax intake for the government should also be less, all things being equal.
Lower income from oil and less taxes collected are of huge significance. Less money would be available, or that could be freed up, to provide needed relief. The cash grants, of which so much noise has been made, would be less than before, with the likelihood of not happening at all. Because oil is now such a big component in Guyana’s economy, when it wobbles, there is the clear danger of citizens tumbling. This is in an environment where anywhere one out of three, or probably as many as one out of every two, Guyanese are struggling to keep their noses above water. Daily conditions have been that rough for them during an oil bonanza. Now that oil signals retreating, the rough times of struggling Guyanese just got rougher.
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