Jamaica's future lies in Big Oil's slippery hands

Dennis Morrison, Gleaner Writer

Jamaican consumers face a tough period ahead with cost-of-living pressures intensifying - electricity bills, gasolene, and basic imported food items are all on the rise. Indications are that water rates may also increase. Over recent months, consumers have, however, got some ease as plentiful supplies of locally grown vegetables have brought steep reductions in prices. It seems that our farmers in St Elizabeth, north Clarendon, Manchester and St Ann, the main vegetable-growing areas, put in greater-than-usual efforts in the last planting season.

The hope is that with the glut in some crops and prices hitting rock bottom - cabbage $10 per lb, cooking tomato $15 per lb, lettuce $40 per lb - farmers would not have suffered losses that would cause them to cut back in the new planting season. Also, if we are favoured with adequate rainfall in spring, we won't be hit by the far-too-frequent drought conditions that usually lead to price hikes in the summer months.

As encouraging as the efforts of our small farmers have been in bumping up output of some food crops in recent months, the fact is that if a dent is to be made in our high food-import bill, and if we are really to rely more on our own food production, the small, traditional family subsistence farm cannot be the main plank of our agricultural sector. A modern business approach must be adopted if production, marketing and resource allocation are to be coordinated on the basis needed to transform the sector. The ingredients for such a transformation (policy, managerial and financial inputs) are still missing.

SERIOUS THREAT

Notwithstanding any short-term relief from domestic food prices, the really serious threat in view remains the volatile oil market, given that the effects of oil prices are so pervasive. With the conflict in Libya apparently contained for the time being, speculation has eased about widespread disturbances that could disrupt oil production beyond Libya. So in the short term, the runaway increase in prices has slowed. In other words, whereas prices moved quickly to US$100 per barrel and seemed likely to keep on climbing, they have stayed within the US$100 range in the past two weeks.

The uncertainties surrounding the political tide in the Middle East and North Africa remain high, however, and the fear of contagion is still great. Just last week, protesters in Syria acted boldly, taking to the streets in numbers that could not have been anticipated, and the agitation in Bahrain has continued despite harsh responses by state forces. In the meantime, the Saudi regime is maintaining its tough posture, presumably to tamp down any temptations to follow examples from the rest of the region.

For the moment, most Americans appear sceptical of their government's preoccupation with the political unrest in Libya, oblivious of the possible consequences for prices at the gas pumps and unconcerned about any humanitarian cause. Questions are being raised as to whether their armed forces should be involved in military action in an apparent civil war, and about such expenditure in these hard times. To these sceptics, it doesn't seem to have registered that should the unrest spread across the region and Saudi Arabia be affected, international oil markets would be severely disrupted - prices at the pumps would go past the dreaded US$5-per-gallon benchmark!

On the other side, those who claim for America exceptional power and privileges were earlier demanding that their country intervene unilaterally to impose order and restore stability. Now that military action is under way, opinion is deeply divided. Such is the schizophrenia that now afflicts American public opinion, and that has become more pronounced in the Obama era. But things could change rapidly in the next three to four weeks not only in the politics of Libya, but for the North African and Middle Eastern region, and indeed, in US domestic politics.

GADDAFI'S FATE IS KEY

Should Gaddafi be removed from power and be banished, this would be further encouragement for popular uprisings against the autocratic regimes which dominate the region. While this would be unsettling and the results may be uncertain, the possibility is that in the medium term, a more durable political stability could be built. But were Gaddafi to prevail, a civil war would ensue, and there would be ongoing uncertainty. With Libyan society organised around tribes and there being no coherent political opposition, the ouster of Gaddafi may take longer and require some degree of foreign military occupation. The US and their allies appear ambivalent about such a move, but it is almost inevitable.

The combination of the disaster in Japan, deep-seated weaknesses in the financial systems of important European Union countries, and structural problems in major sectors of the US economy (housing is a critical one) means that the global recovery will remain fragile. Lingering uncertainty in oil markets would be a further obstacle. Such an international environment does not bode well for Jamaicans.

Dennis Morrison is an economist. Email feedback to columns@gleanerjm.com.