Current tensions between the United States of America and Iran should serve as a stark reminder to Barbados and other regional economies of the need to urgently make the switch to renewable energy.
This is the warning from noted regional economist Marla Dukharan, who also issued a call for urgency in greater regional integration.
Her call comes as Chairman of the Barbados Private Sector Association (BPSA) Edward Clarke called for greater vigilance in light of the geopolitical development.
Oil prices have risen sharply in recent days to a near four-month high, following the US airstrike near the Baghdad airport that killed Iranian general Qassem Soleimani.
On Tuesday, Iran attacked US forces in Iraq. Pundits have predicted that oil prices could continue to rise, and that a prolonged oil surge could raise the risk of a global recession.
Oil prices rose above US$70 a barrel for the first time since September.
About a fifth of the global oil supply flows through the Strait of Hormuz, a narrow shipping route between Oman and Iran.
Dukharan told Barbados TODAY while the US/Iran tension could benefit some oil producing nations in the region, the overall effect will be negative.
“The current escalation in geopolitical tensions, taking with it crude oil prices, are clear reminders to all of us non-energy producers of the importance of switching to renewable and sustainable energy sources,” said Dukharan.
She said: “The implications of recent events may have positive implications for crude oil producers such as Guyana, Suriname and to a lesser extent Trinidad and Tobago, which are not oil importers, but natural gas exporters. But overall, I believe that the effect on the region and globally, would be net negative.”
Pointing out that the global economy was in “great stagnation”, Dukharan is further predicting that more geopolitical developments could be on the horizon.
“The current surge of insularity and the concomitant retreat in multilateralism in and of itself fuels this global stagnation, and the de facto denial of its very existence,” she said.
“The current escalating aggressions will exacerbate uncertainty, curb investment, and therefore perpetuate the weak economic performance we have been seeing for a decade,” said the economist.
Adding that “this great stagnation will be our new normal in the next decade”, Dukharan said it would be characterized by more “geopolitical posturing and tensions”, recessionary levels of international trade, investment and therefore growth, persistent inequality and poverty, all of which create the feedback mechanism to perpetuate the loop.
She suggested that the region double its efforts towards greater integration as a mechanism to safeguard against any major fallout from international geopolitical tensions.
“As the Honorable Mia Amor Mottley, Prime Minister of Barbados has been campaigning hard for, we need to urgently pursue greater regional integration, as we will all be stronger together, and better equipped by amplifying each other’s strengths and compensating for each other’s weaknesses, to face our many challenges together – be it volatile commodity prices, climate change, or otherwise,” Dukharan explained.
“But as the Prime Minister has lamented repeatedly, we face a chronic crisis of political will in this region to truly execute on the integration dreams we have had for generations,” she added.
Meanwhile, Clarke expressed concern that any continued rise in oil prices could put a strain on the island’s international reserves.
The private sector head told Barbados TODAY there was no doubt any tension in the Middle East would drive up oil prices and that would have a negative impact on the Barbados economy.
“So we have to watch this carefully and see how it develops. Not only that, but any increase in tension in any threats by these countries towards the USA could also impact tourism,” he pointed out.
Though stating that the extent of the impact on the region’s bread and butter industry would be difficult to predict, Clarke said it was necessary for officials to stay alert.
“We have to watch patiently and hope that commonsense prevails with these leaders and that the world stay at peace.
“The cost of oil and petroleum products will certainly have a very negative impact on Barbados and the foreign exchange of Barbados. So we’ve got to keep our eyes fixed on it and pray and hope that peace and commonsense prevail in all of this,” insisted Clarke.