EDITORIAL: Libya underlines need for urgency on energy

It is not yet clear what will be the final outcome of the uprising in Libya against Colonel Moammar Gaddafi's long rule.

But even if the regime is overthrown - which increasingly seems likely - the broader prognosis is for civil war, as the country's more than 140 tribes and clans, many of whose leaders were either bought off or suppressed by Gaddafi, compete for influence and power.

These developments, in a far-off North African nation, have implications for policy actions in Jamaica beyond the parallels between the disillusionment felt by their young people and our own, to which this newspaper drew attention during the uprisings that led to the overthrow of perennial leaders in Tunisia and Egypt.

Until the recent unrest, Libya was the world's 12th-largest exporter of oil, putting around 1.7 million barrels a day on the market. It is now exporting around two-thirds its normal output.

That Saudi Arabia has taken up much of the slack, and that the decline in Libyan export has not been as cataclysmic as feared caused the price of crude to retreat by more than six per cent this weekend. But oil was still near US$97 a barrel. A week ago, crude was US$84. It was not too many months before that, in the face of the global recession, $50 oil was in the works.

The point is that the crisis in North Africa and the Middle East is bad economic news for the world, particularly non-oil-producing energy users like Jamaica. Indeed, these events should concentrate Jamaican minds on the need for an effective energy policy.

lack of transparency

On the face of it, the country is moving in that direction with the administration's declared commitment to converting from oil to liquefied natural gas (LNG) as the fuel for the bulk of energy generation. Except that not only has the process been mired in conflict-of-interest controversy, but the basis on which the Government reached its decision has been lacking in transparency.

This newspaper, like others, has argued that low-cost or competitively priced energy could be the linchpin of liberating Jamaica from decades of economic stagnation or low growth. In that regard, the decision about fuel source has to be based on the least-cost option.

Yet, our administration has failed - and continues to do so - to clearly outline the financial and economic assumptions for its decision in favour of LNG and how these compare with other potential energy sources. Nor has it been willing to share with the public recent studies that apparently found major flaws in the project's design - even after the Government had named a preferred bidder for an LNG storage and regasification facility and invited bids for 480 megawatts of electricity-generating capacity based on natural gas. Even as the Government presses ahead, there is no indication that the potential end-users, the monopoly electricity transmission and distribution company and the alumina refineries, are on board.

The last point is significant, and should weigh heavily on the mind of the administration in the face of the upward movement in oil prices. Lower energy cost, combined with global recovery, drove alumina to a price point where reopening UC Rusal's mothballed Kirkvine plant could be economic. Will this hold?

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