Introduction
At this juncture, with the coming to a close of 2020, I believe it would be helpful for readers if at this juncture I proceed to undertake a recap on where I am in this rather lengthy analysis of the impact of the 2020 global general crisis (as I have defined this process) on Guyana’s emerging oil and gas sector. With Guyana First Oil having been announced around a year ago (December 20, 2019), my first column on this subject had appeared back on March 22, 2020.
I intend to undertake this recapitulation by focusing on the four sub-topics that I have structured my analysis under. These are: 1) defining the essential characteristics of the 2020 global general crisis, as I had categorized this term 2) reviewing 2020 outcomes and future prospects for the global crude oil sector 3) evaluating the impact of 1 above, on Guyana’s economy and crude oil sector and 4) identifying several strategic choices I had advised the Authorities need to make before the end of the 2020s.
2020 General Crisis
Based on the above approach, I believe it is helpful for readers to recall the manner in which I had introduced this task in the March 22, 2020 column. To quote: “Guyana’s infant oil and gas sector is being severely assaulted by global and internal convulsions. These have invoked the metaphor…a baptism of fire and brimstone” As indicated in that column, my chief concern was that current reporting on the crisis manifestations in various print and social media was hysterical, to say the least. Often the reporting fluctuated between thinly disguised “glee and delight” at the impending misfortunes confronting the infant sector and the Authorities, to “doom and gloom” based on the mantra that what was unfolding in the public arena was typical of the doomed narrative of failed “Petro states”!
However, my pre-eminent concern then and now remains the need for a thoughtful evaluation of the unfolding circumstances given my conviction that an exceptionally severe global crisis was unfolding to confront Guyana’s infant oil and gas sector. From its earliest manifestations, the crisis has exhibited four clear fingerprints. These are indicators of a simmering global financial crisis; a deepening global economic crisis; an explosive crude oil crisis; as well as a worldwide political economy crisis. The last has encompassed development challenges of economic growth and distribution; investment and returns (profits); along with failure to meet the global sustainable development goals, SDGs.
Crisis Drivers
In order to lay the logical foundation for my intended evaluation of the impact of the 2020 general crisis on Guyana’s infant oil and gas sector I needed to identify at the very outset precisely what I considered to be the key drivers of that unfolding process. I still hold five drivers, individually and collectively, as being mainly responsible for both shaping the major contours of the general crisis as well as for synergistically combining the social forces that drive it. These drivers are presented in random order, in what follows in this section.
The first of the drivers that I had identified in my column last March was based on my observation that, there were concerning signs, beginning as far back as late 2019, of a weakening in the then much hyped “global bull market for investors”. Indeed, I felt those signs were heralding the demise of the roughly decade-long economic boom, which had already lasted from the end of the Great Recession of 2007/2008.
The second driver was initially viewed as a public health epidemic. This however, had transitioned in a matter of weeks into the Covid 19 global pandemic. In turn this pandemic has triggered the onset of the worst global economic recession since the Great Depression of the 1930s. In a nutshell, a public health crisis had morphed in weeks into a complex multi-dimensional crisis, which is why I apply the term, “general” when referring to it.
The third driver, I had indicated was the widely recognized de facto weakening of the so-called “OPEC+ other countries”, joint marketing stance for crude oil. And, in particular, there has been the eruption of an “oil price war” between the Kingdom of Saudi Arabia and the Russian Federation. As we already know oil price shocks have always tended, on balance, to divide global economies into “winners and losers”. In the then prevailing global circumstances, this division of countries’ fortunes was being accentuated by low interest rates and inflation, worldwide. These low rates hamper the ability of the Authorities, mainly monetary, to contain adverse consequences. Historically, also, sharp swings in oil prices have always reverberated on the world’s stock markets. Fourth, there is the consequential impact of all the above on global “swing-oil producers”, particularly the US oil shale sector.
Fifth and finally, there are those long-term structural challenges that will face all high-carbon sources of energy in the future. Global concerns about climate change plus a growing geopolitical “option” for renewable sources of energy are shaping the future energy mix. Indeed, such pressures have been severe enough, to have led to the prediction that this year, 2020, could well end up by being only the fourth year that global demand for oil will actually contract since the mid-1980s!
Following the specification of the global general crisis I had then proceeded to an extended evaluation of its five main drivers over ten columns (March 22 to May 24, 2018)
Conclusion
Based on the above recap of my extended delineation of the 2020 global general crisis, next week I attempt a similar recap of the second sub-topic cited above.