WITH Barbados having to fork out over 0 million to pay for imported energy to date, an economist and a statistician are suggesting that the country invest in alternative energy sources to generate electricity.
Warning that such high expenditure on imported oil could create a continuing drain on the local economy, Economist Alvon Moore and Statistician Julian Jones pointed to the use of solar technology as a viable alternative to oil whose usage should be reduced.
They made the comments in the recently released Central Bank of Barbados December 2011 Economic Review which is published online. The focus on energy highlights the impact the cost continues to have on the local economy.
In their presentation, the point was made that the sale of foreign exchange by the CBB to commercial banks on behalf of oil importers has increased with oil imports. According to Moore and Jones, the importation of oil is a significant driver of Barbados’ total import bill, and it now accounts for approximately 25 per cent of total imports. In 1998 the figure was seven per cent.
“Consequently, oil has become the largest individual category of imports, surpassing food and beverages and machinery, which account for 17 per cent and 13 per cent respectively”.
They acknowledged that this loss in reserves due to oil purchases has ranged from a low of .6 million in 2007 to a high of 3.8 million in 2008 when the price of oil rose to record levels.
“For the year to date, the decline in Central Bank reserves due to oil purchases is 3.5 million, which is .3 million below the figure recorded for 2010. These statistics indicate that as a price taker depending entirely on imported oil for its energy needs, could prove a continuous drain on the Barbadian economy,” they noted.
“The use of solar technology is a viable alternative, as it is a mature technology with falling costs, but may require substantial time and investment before any gain can be realised”.
Moore and Jones indicated that fuel oil accounts for a third of the total oil imports into Barbados, mainly because of the reliance of it for the generation of electricity. The two experts referred to an earlier study which showed that a one per cent increase in electricity consumption would lead to a 1.43 per cent rise in imported oil.
Demand for the other oil imports remain relatively constant over the period and are used primarily in the transportation sector.
It was also pointed out that while some countries – especially Brazil – have been producing ethanol as a partial or full substitute for gasoline for over eight decades, the relatively high costs associated with the full-scale conversion from gasoline to alcohol-fuelled automobiles, means that gas and ethanol are imperfect substitutes.
Moore and Jones added that from the experiences of Brazil and China, Barbadian authorities should seek to determine whether investments in alternative sources may be enough to have an offsetting effect on Barbados’ demand for oil.
(Source http://www.barbadosadvocate.com/newsitem.asp?more=business&NewsID=21929)
