Editorial: The new oil crisis?

The most memorable oil crisis in our lifetime was in 1973 when the Arab members of the Organisation of Petroleum Exporting Countries (OPEC) stopped shipping oil to the United States and many of the other countries of the world that were believed to be supportive of Israel in the Yom Kippur War. That oil embargo, as it was called at the time, resulted in an acute shortage that produced long lines at gas pumps, gas rationing and exponentially higher gas prices.  Of course, even here in Antigua, we felt the squeeze, and the resulting economic hardship was one of the factors in a steady erosion of support for the still-young Progressive Labour Movement (PLM) administration.  Since that rather world-changing oil crisis, governments all over the world have kept a keen eye on gas prices and oil supply and demand. After all, governments (sometimes unfairly) always seem to bear the brunt of the blame whenever gas prices go up, and many governments have fallen due to unrest and political agitation over high fuel prices.

It was with this in mind that the Venezuelan government, under then President, the late Hugo Chavez in 2005, sought to provide favourable agreements with many Caribbean and Latin American countries during that historic First Energy Summit. Of course, as many as 14 Caribbean countries, Antigua and Barbuda included, gladly signed that PetroCaribe agreement (as it is called) because the terms were extremely attractive. They allowed us to purchase oil from Venezuela at market value whilst only paying a small fraction upfront, and the balance over a 25-year period at 1 percent interest.  This Energy Cooperation Agreement was a godsend for Antigua and many of the other countries in the Caribbean and Latin America because it provided us all with a source of relatively cheap oil. Of all the many problems that we could face, wildly-fluctuating and high fuel prices was not supposed to be one of them.

    But that was then, and this is now. Under Hugo Chavez’s Bolivarian/socialist revolution, the government increasingly sought to nationalise and take control, not only of its oil sector, but almost every area of the economy. This resulted in a flight of investment capital and a steady decline in the standard of living for many Venezuelans. Store shelves became empty, and there were increasing voices of discontent and protest against Chavez’s seemingly hapless successor, Nicolas Maduro. In recent times, Venezuelans have taken to the streets and engaged in tactics designed to bring the Maduro government down. Maduro has responded with haste (and with some eye-brow-raising dissent-stifling measures) to extend his grip on power.

 Of course, many countries, Antigua and Barbuda included, have been loath to criticise or condemn some of Maduro’s (undemocratic?) manoeuvres for fear, some might say, of jeopardising the PetroCaribe Energy Cooperation Agreement. These countries have cited varying versions of the old excuse for inaction, “Non-interference in the internal affairs of other countries.” They have also joined, first with Chavez, and now with Maduro, in blaming all of Venezuela’s problems, and the resulting political unrest, on a United States conspiracy and greedy capitalists. And to an extent, Maduro is correct. Exhibit A, the seizure of Venezuelan oil facilities in the Netherlands Antilles by ConocoPhillips to force Venezuela to comply with a legal ruling in Conoco’s favour. Not to mention U.S. President Donald Trump’s threat of new sanctions on Caracas in the wake of Maduro’s controversial reelection situation.

From attempts, some may say to hijack the National Assembly and the use of (excessive?) firepower on protesters, to the flight of thousands of desperate Venezuelans into Colombia, Brazil and even Guyana, the situation in Venezuela is pretty bleak, and many political and economic pundits wondered how long Caracas and the Petroleos de Venezuela SA (PVDSA) (the state-owned oil and natural gas company) could manage to keep up with the PetroCaribe agreements. Well, it seems the situation has reached critical mass and many of the headlines around the world spoke of Venezuela’s inability to deliver on its promises. In fact, there was word, first reported by Reuters, that Caracas was contemplating a force majeure, a legal loop-hole that would relieve PDVSA of its PetroCaribe agreements.

Last evening, word reached our news desk that PDVSA will be suspending the PetroCaribe agreement with Antigua and Barbuda and several other Caribbean countries. Of course, this is hardly good news for any of us, and the concern here in St. John’s is whether we will see a rise in prices at the pump. Antiguans and Barbudans have made an industry out of high gas price complaints, and we suspect that any gas hike will not be taken kindly. Never mind that we are aware of part of the reason, at least the part having to do with PDVSA and the dire situation in Venezuela.

We certainly wish to thank the Venezuelans for their generosity and graciousness (never mind their own hardship) under the PetroCaribe agreement, and we hope and pray that the social, political and economic problems in Venezuela can be resolved as a matter of urgency. In the meantime, Antiguans and Barbudans may soon be nervously looking at the gas gauge because a price hike could be in the offing.  

For the record, the West Indies Oil Company in Antigua said it has not received the PDVSA notice.

WIOC has added that “In any event, even if it were the case that PDVSA had suspended shipments, WIOC is not reliant on fuel supplies from PDVSA for the petroleum requirements of Antigua and Barbuda. Indeed, WIOC has always diversified its sources for our range of petroleum products and therefore utilises a number of suppliers.”

The company also added, “WIOC assures the Antigua and Barbuda public that it is fully serviced by its suppliers and it is able now and, in the future, to meet demand. Consequently, there is no need for concern.”

Only time will tell.  

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