Blame both JLP and PNP for oil hedge fiasco

Friday, August 17, 2018

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Dear Editor,

I'm not too excited about either political party because, in my view, they take turns in mismanaging the country's economy; namely, by wasting the island's meagre financial resources. For example, they're now making a big fuss about the tax levy for the oil hedge on gasoline which the previous Administration enacted amid the criticism of the now Government when it was in Opposition.

The People's National Party Opposition now wants the Government to rescind the tax, while the Jamaica Labour Party Government wants to retain it.

The simple truth is an oil hedge shouldn't have been implemented in the first place; hence there would have been no need for a gasoline tax. The fact of the matter is that both political parties bought into the oil hedge idea, so both parties should share the blame for this resulting $3.3-billion giveaway.

That is the issue neither party wants to discuss — the giveaway — because that is what the oil hedge costs the country with nothing to show for it. The oil hedge came about because of strong recommendation from the governor of the Bank of Jamaica to the previous Government, which then enacted the tax levy on gasoline, as they say, in order to protect the country from higher gasoline prices.

That was bad advice and a bad idea to begin with as expressed by this writer when it was first announced. All indexes, charts, graphs, and trends was pointing to a downward spiral in the price of oil. The price of oil is determined by supply and demand; and supply far exceeded demand. The world was experiencing a huge reserve with new oil fields being discovered in America. Sanctions were about to be lifted against Iran and they would become a legitimate oil exporter once again.

The current price of about US$66 per barrel, and it is still overpriced, in my view. The only reason the price is where it at is because the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, decided to cut production in order to prop up the price. If not for this the world would be drowning in oil.

Against this background, the oil hedge made absolutely no sense. If an oil hedge needed to be established it should have been when the price of oil was at around US$35 per barrel. Some poor analysis took place; maybe by the governor of the Bank of Jamaica or his technocrats.

The $3.3-billion giveaway could have:

• purchased and refurbished both the Oceana Hotel and the Jamintel building in downtown Kingston for government offices;

• helped to transform Port Royal into a legitimate attraction for locals as well as tourists, with modern housing, restaurants, gift shops, museum, etc; and

• gone a far way in rectifying the country's water woes, at least in the Corporate Area.

What is so troubling is the lack of outcry and outrage from the society on a whole in regard to this fiasco.

Noel Mitchell

Westchester, New York, USA

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