Demand has doubled in the developing countries
Some exporters have argued that they need to maximise their earnings from the deposits, which are finite resources that are declining as they pump it. This is not entirely unreasonable. In Venezuela, for example, oil and gas account for 98 per cent of total exports and 40 per cent of GDP.
Starting in 1973, the oil producers formed a cartel, the Organisation of Petroleum Exporting Countries (OPEC), and tripled oil prices. That started the 41-year-long recession of the Jamaican economy. Even today, Jamaica is still dependent on oil for over 90 per cent of its energy needs. Oil accounts for 36 per cent of total imports and 16 per cent of our GDP.
High prices and surges in oil prices have seriously retarded economic growth in Jamaica because they trigger inflation, increase production costs, and raise the cost of living. Paying for oil deprives the economy of other imports, makes exports uncompetitive, and increases the external shocks, even with PetroCaribe.
Between 1986 and 2002, the average price of oil was US$18 per barrel, but in recent years that has jumped to over US$100 per barrel. The oil-exporting countries have limited their supplies to ensure that prices stay as high as possible. The price was also kept high by world oil demand, which has increased 50 per cent since 1986. Demand has doubled in the developing countries, driven by rapid economic growth in China and India.
Happily, the outlook for oil prices is that there will be an easing in 2015 because of the increase in output of oil and gas in the United States, as a result of fracking technology which allows the tapping of shale oil deposits. Bloomberg, Barclays, Goldman Sachs, and others generally agree that prices will fall, starting in the first quarter of 2015.