The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must use the sharp global oil price drop as “breathing space” to develop sustainable, long-term energy policies, a top private sector executive yesterday saying it was unclear how big a Value-Added Tax (VAT) counterweight this will be.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, said any VAT ‘offset’ depended on the extent to which the global oil price fall was reflected in Bahamas Electricity Corporation (BEC) bills.

“What remains to be seen is how much of that flows through BEC,” Mr Bowe said, as energy prices were the major oil-related costs for both businesses and households.

While motorists have seen a drop in the price of gasoline at the pump, BEC’s fuel surcharge, which accounts for more than 60 per cent of consumer bills, has yet to reflect recent developments in global oil prices.

The Central Bank of the Bahamas’ recent monthly economic report for November disclosed that while BEC’s fuel charge decreased by 3.6 per cent month-over-month, at 26.71 cents per kilowatt hour it was still higher than November 2103 by 5.6 per cent.

Oil prices, as measured by the Brent Crude Index, stood at $57.90 per barrel yesterday, while the West Texas Intermediate Index was at $54.12. This compares to a 52-week high of $101.33.

The timing of any impact for BEC customers will depend on when the Corporation makes its bulk oil purchases, but it is likely some more relief - the extent unknown - could materialise in early 2015, just in time to reduce the VAT impact.

Leslie Miller, BEC’s chairman, previously blamed the Corporation’s $128 million unpaid debt owed to its fuel supplier, Shell Western, as the reason why energy costs have not come down.

Mr Bowe, meanwhile, also pointed to BEC’s dire financial position, and emphasised the need for “meaningful” reforms and a reduction in the cost of energy.

He added that the Bahamas did not control oil prices, and was at the mercy of the OPEC cartel when it came to fossil fuel costs and availability.

“We can’t count on this as a saving grace,” Mr Bowe told Tribune Business of the drop in traditionally volatile oil prices. “We should use it as breathing space as we set a course for long-term, sustainable policies as it relates to energy and natural resources.

“What is important is that we drive schemes to help us sustain this in the long-term. We shouldn’t rest on our laurels. With oil prices down, we should use it as an opportunity to devise strategies before it goes back up.”