Choosing your own route

Barbados, along with oil-rich Trinidad and Tobago, did not endorse the PetroCaribe deal during the recent summit of energy ministers in Puerto La Cruz, Venezuela.

Barbados says there were too many unanswered questions surrounding the offer. The Barbados delegation did not have enough time to examine the document which was only made available on the morning of the summit.

Accordingly, there was need for assurance about the status of its processing arrangement with PetroTrin in Trinidad and there are concerns whether PetroCaribe would take into consideration or supersede work already done by a Caricom-appointed task force to seek out alternative options for the region.

One expects that signatories to the Venezuelan offer would have carefully weighted all the relevant circumstances before deciding. Jamaica has said that of the reason for signing on to PetroCaribe was rising oil price. It was also signed in the context of pulling the country out of poverty and charting its own foreign policy.

However, despite growing anxiety about rising oil prices and the attendant inflationary pressure, there has to be a clear understanding of what is involved. The concept that PetroCaribe is going to result in cheap oil is rubbish, Barbados has argued.

They argue that "Venezuela does not sell its oil for any reason other than to get money for itself. It will therefore sell at the market price and if it sells for less there must be some other benefit in return," according to an editorial that appeared in the Barbados Nation on Tuesday.

Barbados, it said, has a responsibility to take all relevant details to the cabinet and get consensus before signing any such agreement.

"Although Barbados has since indicated its willingness to enter into further dialogue with Venezuela concerning possible assent to PetroCaribe, consumers should disabuse their minds of the notion that cheap oil is on the way," the editorial said.

The PetroCaribe deal does not offer oil at discounted or subsidised prices. Instead it makes it easier for countries to purchase from Venezuela by cash and a loan facility.

For example, if the price were US$15 per barrel, five per percent of the purchase price of the Venezuelan product could be handled by the PetroCaribe loan financing arrangement.

At US$70 per barrel, a signatory country can pay 60 per cent or US$42 a barrel in cash on delivery, with the remaining US$28 converted to a loan. If the price reaches US$100 per barrel, 50 per cent of the purchase can be paid through the loan financing arrangement.

Signing on to PetroCaribe means you looking at a long-term debt — on easy terms, but not access to cheap oil.