By Kimberly Ramkhalawan
March 15, 2022
Caribbean Academic heads sought to come together to discuss the possible implications the Russia Ukraine Invasion could have on the region. Concerns have been mounting over the cost of petroleum products and the effects it will have on regional states, especially following the price Caribbean state economies paid following the COVID-19 Pandemic. Dissecting what is causing the soar in prices, Bashir Badawi, Management Consultant, at Seladon Petroleum Associates Limited explained the geopolitics behind the supply and demand issues arising.
UWI Academic heads on Thursday discussed the implications of the Russia Ukraine Invasion as it held its Vice-Chancellor’s Forum with the Sir Arthur Lewis Institute for Social and Economic Studies titled, “Of Ukraine Oil”.
Petro-economic analysis shows that the greatest uncertainty the world is facing is oil price and the ripple effect from these international oil prices within the region can be disastrous especially after emerging for a deadly and costly pandemic. He fears that prices can soar as high as US$300 per barrel given the current state of volatility.
With big consumers of oil are currently India and China, and reports suggesting that they have been engaged in purchasing this stranded crude oil from Russia, as a means of keeping the country afloat in the midst of sanctions imposed as a result of the war action the former Soviet Union has initiated. Pointing to the map, Bashir says what remains hidden to the naked eyes are pipes leading from Russia to China, making it the biggest oil client.
Currently crude oil tankers remain stationary without the likelihood of getting any customers, creating a crisis in the oil industry. Germany is 53 percent dependent on Russia for its petroleum products within the European market. Badawi explains that history shows measures taken by Germany to curtail its impact on climate change, included the adopted plan to become more dependent on Russian petroleum particularly gas, and describes the situation as a Russian bear claw sinking its paws in the European market, as its pipelines flow throughout European nations, proof of its dependency on Russian fuel.
Badawi says with talks of oil climbing to US$200, all eyes will be on the markets over the next fiscal quarter of 2022, as a means of ascertaining whether the world will be going into another recession.
But due to the quality of heavy crude produced by Russia, and its inaccessibility, the common practice of mixing this with lighter oils, buyers at the refineries and the traders who buy the oil are currently having a hard time finding a substitute heavy oil that can be mixed into their feed stock. Badawi warns of the Trilemma, which entails security water, and security of some supply in the midst of the fight for this oil, ahead of the winter season at the end of this year. Factoring in the effects the pandemic has had on local economies, The Caribbean islands are very prone to this trilemma all while managing energy poverty in the islands or what is termed as equitable energy.
He adds that typically in the region, countries often look for atleast a 17 percent hurdle rate when it comes to their projects based on oil and gas prices for its economic modeling, but for alternative energy, 10 percent can be considered.
Badawi’s recommendation, is that stakeholders in these companies would require a mind shift in the way they do business and get used to the idea of lower levels of returns on their investments.
Arrangement between Russia and OPEC should be under a microscope at this time and sees any fall out between the two bodies as unlikely. He warns of a possible axis forming among oil producing nations with Russia and Belarus, but sees some potential of Cuba, and Venezuela joining in.
Badawi added that oil producing countries in the region, should keep in mind the opening of new markets. Pointing to the potential of Jamaica’s oil fields and business with Norway’s United Oil, the professor spoke of legislation that makes these countries a competitive partner in the oil and gas industry, will be pivotal in securing its financial future while at the same time, making energy accessible in the region in lieu of high prices from other commercial streams outside the region.
Vice Chancellor, Sir Hillary Beckles said there must be a price for waging such a war, to which he reminded those gathered of the reparations paid in past wars.
Beckles says those going to war, must be held accountable to the nations these wars affect, and the implications it has on other societies and countries and it was time for this to be enforced by the United Nations.
Meanwhile, Jamaica is always weary over the sanctions placed on Russia, as it has always been a large market for its aluminum. James Stewart, Senior Director, Economic Planning and Research, Planning Institute of Jamaica explored some of the policies that could be implemented in response to the situation. Earlier this month at the 33rd Intersessional Heads of Government CARICOM Meeting, it was resolved that while the Caribbean body had put out a statement on the war, each CARICOM nation had decided to make the decision of placing sanctions based on their individual position