Generation G2K, Contributors 
Venezuela's President Hugo Chvez poses with Jamaica's Prime Minister Portia Simpson Miller after signing an agreement in Montego Bay, August 14, to increase oil and fuel supplies to Jamaica by 12 per cent, and to create a joint venture under the world's No. 5 oil exporter's PetroCaribe initiative. - File
Over the last three months, the Government has been hinting at the possibility of oil in the territorial waters of Jamaica. The Prime Minister, in at least one media report, was quoted as saying she wanted all Jamaicans to pray for the discovery of the precious commodity.
Given that it is the electoral silly season, such pronouncements do give rise to scepticism, as our politicians are known to pander to the wishful in times like these. For those concerned about national development, and know of the penchant of our government to spend wantonly, we must ask, would Jamaica benefit from this prospect?
Jamaica, as a non-oil producing country, falls into the category of countries vulnerable to what economists term 'oil shocks'. An oil shock is an energy crisis where a great shortfall or price rise in the supply of the energy-producing commodity occurs in an economy.
Energy crisis
The crisis often has effects on the rest of the economy as many recessions are precipitated by an energy crisis of some form. In particular, the production costs of electricity rise, which raises manufacturing costs, and concomitantly, the price of basic commodities.
Oil is one of the critical inputs driving modern economies. Developing countries especially are susceptible to movements in the price of this input and this was evident particularly during the mid 20th century oil-price shocks. Non-oil producing island states such as Jamaica, have had little respite in this regard since 2003.
The rising trend of oil prices in the last three years has been felt mainly by the poor of Jamaica. Prices for utilities such as light and water, and gasolene at the pumps have more than doubled in that period. In February of 2004, the ex- refinery price per litre of 87 unleaded was $27.42. Less than three years later in December 2006 it stood at $47.13. This, coupled with rigid wages especially for civil servants, has placed many persons in the realm of working, yet remaining poor.
Oil effect on the economy is not only limited to the consumer but also resonates in the production sector, as oil/energy is a key factor of production. Many companies of late have been embarrassed publicly by their energy debts.
Pressure on public purse
Government is not immune from the oil syndrome as our oil bill has doubled in the last three years, resulting in a serious strain on our dollar. This resulting depreciation of the dollar, again will result in higher prices for consumers. Mineral fuels and related materials as a percentage of our total import bill have moved from 16.6 per cent in 2002 to approximately 32 per cent by the end of 2006.
Our trade deficit, not surprisingly, has shown similar adverse trends moving from US$2,285.3 million to approximately US$3,400 million in 2006 which, in perspective, equates to moving from 29 per cent of GDP in 2002 to about 37 per cent in 2006. In fact, since 2002 there has beena continuous increase in these statistics. This does not augur well for the future of Jamaica, and in essence, the lives of the people - from the unemployed, to the working, to the owners of businesses.
The Nigerian case
Despite having some of the largest deposits of the world's oil resources, Nigeria remains one of the most underdeveloped nations in the world. According to the World Bank, millions of people in Nigeria exist below the poverty line. Since winning independence from Britain in 1960, Nigeria has witnessed at least one million deaths in one of Africa's biggest civil war and 30 years of army rule. The country is described by some scholars as being governed by a clique of military and civilian elite who have behaved, according to African historian Basil Davidson, like "pirates in power".
Pirates sell the resources of the country to benefit themselves, rather than the people of Nigeria, with very little trickle down.
Despite some US$280 billion in export revenues since the discovery of oil in the late 1950s, at least half of all Nigerians live in abject poverty without access to clean water.
The value of the national currency has fallen. The foreign debt stands at US$32 billion. PNP is prone to run with it.
There is no doubt that People's National Party (PNP) governments since 1989, have a history of corruption, profligacy and mismanagement. These acts include notable scandals such as the Rollins Land Deal, the Shell waiver debacle, Operation Pride, Fat Cat Salary fiasco, Intec Fund, and more recent examples such as the NSWMA affair. Evident in all these problems was an absence of accountability and culpability.
Yet, a more striking act of deliberate profligacy was apparent in Finance Minister Dr. Omar Davies's comments to a group of PNP supporters at the Meadowbrook High School, months after the 2002 General Election. He spoke quite callously of the Government's wild and imprudent spending of taxpayers' money leading up to the 2002 General Election.
Lessons from Trinidad
The Trinidadian government of the 1960s took decisions in setting up the Trinidadian oil fund that has given it sustainability. The fund has managed to finance education up to the tertiary level for Trinidadian citizens, and a national health fund that provides for primary health care. Specially created checks and balances including the composition of the board that governs the fund and the way decisions are taken to spend money, ensures that the money is spent in the most prudent ways.
The proposition of oil has raised the nation's hopes of financing its economic turnaround, and paying our gigantic and crippling debt. We have to be careful, however; lest the rumours are true, our newfound wealth goes the route of 'Sammy's mouth'.
Generation 2000 is the young professional arm of the Jamaica Labour Party. Please send comments to www.g2kja.com.
