Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 143
The world continues to process the stunning outcome of Tuesday’s U.S. presidential election, with Donald Trump’s unexpected return to power sending shockwaves through global markets. While the political implications are far-reaching, the focus of this column is an examination of what Trump’s presidency means for the oil and gas sector, particularly given the lessons learned from his first term. The landscape has shifted significantly for Guyana since 2016 – we now stand as an oil producer rather than merely a regional observer, making both historical lessons and future prospects increasingly relevant to our national interests.
The immediate market reaction to Trump’s victory was telling, with both major oil benchmarks showing significant decline. Brent crude dropped 61 US cents to $74.92 per barrel, while West Texas Intermediate fell to $71.69. Citibank’s forecast of continued downward pressure through 2025 poses particular challenges for Guyana, which has embarked on ambitious spending plans based on previously optimistic price projections. The potential drop to around US$60 per barrel from July 2024’s high of US$84 represents a concerning 30% decline that could severely impact our budgetary plans, especially as the government contemplates significant payouts to citizens ahead of our 2025 elections.
Trump’s impact
Trump’s potential impact on oil prices presents several counterbalancing forces. At home, his renewed “drill, baby, drill” agenda and promised deregulation of U.S. oil production could increase global supply. Abroad however, there can be offsetting events and activities. Trump had boasted that the war in Ukraine would end almost immediately, possibly putting upward pressure on oil prices by enabling global economic recovery and increasing energy demand. On the other hand, if this leads to the end of sanctions imposed on Russian products, it could result in an increase in supply. It is unlikely that Iran will return to the international market while continuing turmoil in Venezuela is hardly likely to see any significant oil coming to the international market.
For Guyana, this complex dynamic intersects with both structural and regional challenges. Based on its own perverse logic, the Government failed to apply ringfencing between production and prospecting activities. As we have explained in these columns, Guyana is in fact subsidising exploration activities today in the hope that the rewards in the future will make the sacrifice worthwhile. Well, Trump 2 makes that future look far less rosy, and we are now staring at the prospects of 14.5% take each year for an extended period. The PPP/C has become drunk with oil and never for a moment did it consider how vulnerable the 2016 Agreement makes the country to oil price fluctuations. Setting this aside however, Guyana’s position differs markedly from our Caribbean neighbors – while they continue to grapple with energy security concerns, as they did during Trump’s first term, we now face the challenges of managing newfound oil wealth.
Guyana’s response
Trump’s election poses a challenge to Guyana’s policymakers who will have to carefully navigate his mercurial temperament and transactional approach to everything. The challenges outweigh the opportunities. While other Caribbean nations must again brace for potential impacts on development assistance and trade relationships, Guyana needs to balance these regional concerns with our position as an emerging oil producer.
The mixed outlook following Trump’s re-election requires us to focus on those areas within our control: improving our regulatory oversight, building fiscal buffers where possible, and continuing to develop our broader economy. The experience of Trump’s first term shows the importance of preparing for policy volatility while maintaining regional relationships and economic diversification efforts.
The need to diversify the economy has not received the attention it deserved. Sadly, it may now be too late as the Dutch Disease has touched almost every sector of the economy. If ever there was a need to call for the renegotiation of the 2016 Agreement, it is now too late. Routledge will report us to State Department and there will be a call to Georgetown to keep the people in line. If ever there was need for careful financial planning, management and control, the runaway spending train has already left the station. If ever it was important to draw the line between current expenditure and intergenerational savings, the automatic drawdown level has been set to high.
As the world contemplates Trump 2, Guyana faces some real challenges. The week has been transformational, and the only hope is that things will not be as bad as they seem.
Chris Ram
