PNP oil hedge the biggest three-card trick in modern Jamaica

BY Fabian Lewis

Tuesday, August 07, 2018

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Politicians are masters of the art of deception. — Martin L. Gross.

With the price of fuel going up and the concern about the Special Consumption Tax (SCT) on its contribution to the rise the PNP has been clamouring for the Government to roll back the tax. Who can forget the “roll back the tax” hypocritical chants in Parliament recently? With that performance one would be easily led to believe that the cost of fuel is solely because SCT is on it.

Not only that, but the representatives of the People's National Party (PNP) have placed the SCT front and centre of the conversation about fuel prices and have sought to mislead the country about its scope. Well, that is until recently when Minister of Finance Dr Nigel Clarke hit back on that narrative and offer a truthful explanation. The country now has a greater understanding of how this hedge came about, its scope, its impact, and frankly its utility to this country.

When the oil hedge was put in place, and the tax that came about to fund it, two things were 'sold' to this country:

1. It was for the oil imported into the country (all of it); and

2. The money garnered from the tax would be placed into a special fund.

This is where the three-card trick was played on Jamaicans. It was one humongous lie!

The fund was never set up, and we are now learning that the hedge was for one-third of all the oil Jamaica imports. The oil hedge was sold to Jamaicans as something to save us from high oil prices in totality, not one-third! This was a PNP three-card trick.

Now let's put this into perspective. Jamaica imported 24 million barrels of oil over the period of the oil hedge. How much did the hedge cover? If you listen to Phillip Paulwell crowing about rolling back the SCT on fuel you would have been thinking it covered it all. Not so! The oil hedge covered only eight million barrels!

But that was not all. Of the over $6 billion collected from the tax, the PNP Government paid only a little over $3 billion on the hedge! What of the rest?

The entire hedge was predicated on one big lie. One big three-card trick!

Let's look at this thing in even more detail. Of the 24 million barrels of oil that Jamaica imported, only eight million was insured, so to speak. That means 16 million barrels of oil came into Jamaica and the public had to pay the full cost of it. Meanwhile, the country was led to believe that all the oil coming into the country was “insured”, so to speak, by the hedge. In essence, what the hedge tax did was to take money from the pockets of Jamaicans under false pretence.

So the question that many might be asking is: Why was it that oil prices was so low then? Simple. The price on the world market tumbled when the United States, China, Russia and the European Union signed the Iran nuclear deal and brought back Iran into the international community, and with that an abundance of oil. Ironically, it's the reverse of that same process that has caused the oil price to shoot up now. I await an alternate explanation.

Another question that must be asked is why did the PNP Government not use the other $3 billion to hedge on oil since it believed it was such a good deal? Or, was it a sign that the PNP knew from then that the oil hedge was foolishness? It's rather confusing.

One would have thought that since, according to the PNP Government, the oil hedge was so great for the country, and bringing such relief to consumers, and the Government knew that only eight million barrels had been hedged, why then wasn't the decision taken to add at least another $8 million since the money was available?

My take is that the PNP Government knew it was damn nonsense and a waste of money. Some might even argue that it may have been the intention from day one: Let the Jamaican people believe that two plus two equals $3 billion! It's rather sad to now know we were effectively sold a six for a nine with this oil hedge.

Can the Opposition PNP, that merry band of misfits, really talk about transparency and good governance?

When you talk about good governance the first thing you do is to level with the people. Selling an oil hedge predicated on a faulty information — or misinformation — isn't being level with the Jamaican people. Telling the nation that the money would go into a special fund when no such thing happened isn't levelling with the Jamaican people. Taking money under false pretence isn't levelling with the Jamaican people.

So what would happen if the present Government were to roll back the tax? Since it only covered eight million barrels of oil, the tax roll-back would consequently only cover only eight million barrels. If we are consistent with our oil importation, — and the 24 million barrels are the same — we would still be paying full price on 16 million barrels. In effect, the hedge tax rollback would do little to ease the current high prices at the pumps.

One thing you can't do is play three-card tricks with facts. You will always get a joker. That is exactly what the Opposition PNP is looking like. And a sorry joker at that.

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