by Larry Smith
“The (days of relatively inexpensive energy) are behind us and we’re now dealing with a very different environment...We all need to be more thoughtful in how we use energy.”
--US Energy Secretary Samuel Bodman
While State Finance Minister James Smith argues for alternative fuels and greater efficiency to tackle rising energy costs, Vincent Coleby, chairman of a government advisory panel, wants to make petroleum cheaper for Bahamians.
But according to Minister Smith, cutting gasoline taxes is “off the table”. And cutting retail and wholesale margins will simply postpone hard choices that the country has to make.
Mr Coleby’s Petroleum Usage Review Committee was appointed in June to look at margins, transport costs, royalties and rentals in the local fuel industry.
At a College of The Bahamas panel discussion last week, Mr Coleby said we could get lower prices by subscribing to Petrocaribe - a regional political and trade pact proposed by Venezuelan President Hugo Chavez.
Petrocaribe offers oil on easy credit terms to regional governments in return for “political solidarity”. The savings are supposed to come from cutting out middlemen – the regional traders who coordinate fuel deliveries to local distributors – and shipping fuel at cost.
But although Mr Coleby denied that signing on to Petrocaribe would eliminate Shell, Esso and Texaco from The Bahamas or the region, he said the committee did want to restructure the local fuel industry.
“Ninety per cent of our fuel comes from Venezuela now and has done for the past 50 years, so there will be no change in quality or source,” he said. “We seek to make Shell, Texaco and Esso partners in bringing the price of fuel down.”
Mr Coleby dismissed the geopolitical risks of joining the Venezuelans in an overtly anti-American political and trade pact as mere “scare tactics.”
“So what if the US penalises us. We have to stand on our own feet, and pay our own way, and do what is best for us.”
Garnet Dawkins, a Shell dealer for 19 years, agreed: “We have to frame our policies to benefit us. The whole industry needs to be overhauled and Petrocaribe is the best way. Retailing is supposed to be reserved for Bahamians, but most gas stations are now owned by multinationals. We need to own the stations,” he told the meeting.
But other panellists were not so sure.
COB lecturer Rupert Pinder said oil should be paid for out of current revenues, not future cash flow: “Most countries that signed onto Petrocaribe can pay with commodities like bananas or sugar, so it makes more sense for them.”
Hotel association chief Earl Bethel admitted that most hotel earnings this year had been eaten up by rising utility costs. But he preferred to see additional incentives for energy-efficient equipment - including vehicles and alternative fuels – on top of the recent elimination of duty on solar panels. He also called for easier bank lending policies for these items.
“Why don’t we have a national energy policy?” he asked. “Government must lead by example.”
Small Business Association chief Marlon Johnson told the meeting that gas prices adjusted for inflation were no higher now than they were in 1981:
“I recall when we had to buy locks for our gas tanks in the 1970s,” he said. “We need a medium-term focus at the national level. And we need a comprehensive energy policy.
“Higher fuel prices may be better in the long run because they will encourage fuel efficiency. We should discourage the use of fossil fuels, and promote energy efficiency and the use of alternative fuels. This debate should not be about cheap gas.”
Mr Johnson pointed out that the price of gas in the Bahamas is lower than in many other countries, especially in Europe: “And it is disingenuous for government ministers to talk incessantly about price when they could cut their gas tax at a stroke.”
He suggested several planks for a national energy policy, including adjusting tariffs on large and small vehicles, subsidising alternative fuels, upgrading mass transit, promoting solar power and raising the duty on conventional water heaters.
He also recommended architectural contests for energy-efficient homes along with tax exemptions to promote energy-efficient construction, more use of trees for cooling, and better urban design so we don’t have to drive for every basic necessity.
“We should do an energy audit on BEC,” he declared to much applause from the standing-room-only audience. “It is the inefficient state bureaucracy that prevents us from saving on energy. We can’t control the world but we can control our use of energy.
“We are using a sledgehammer to kill an ant. The market will correct itself, so why let short-term shocks affect our longterm view,” Mr Johnson said.
Esso dealer Oswald Moore argued that lower prices with strings attached will only mortgage our future: “Jamaica and Barbados have state energy corporations now and their gasoline prices are higher than ours. Are we going to control margins in other industries whenever prices go up?”
But independent MP Pierre Dupuch said the country should take the low-interest credits offered by Petrocaribe and run:
“Maybe oil is being used as a weapon by Venezuela, but the US is using free trade as a weapon too,” he said.
POVERTY IN THE BAHAMAS
One of the ostensible goals of Petrocaribe is to fund social programmes around the region. Supporters say the deal will free up cash for anti-poverty projects at a time of high oil prices.
Well, the Bahamas Living Conditions Survey was presented at the opening of Parliament last week, making it a public document four years after it was compiled.
The 250-page report contains much analysis of Bahamian social conditions. Here’s an excerpt from an article Tough Call wrote about this study a year ago:
With the support of international agencies, the government is pushing a range of social programmes that include expanded NIB benefits, national health insurance, a broad-based consumption tax, and a state pension scheme.
And that’s just what we know about so far.
Many of us have the view that although the country is awash with great wealth (much of it inherited), this is not being shared around and most Bahamians are deprived of opportunity and forced to live in grinding poverty. But this is a distortion of reality.
Poverty is not simply a measure of inequality between those who are well off and those who are less well off. Social scientists point to a much deeper set of deprivations.
So what exactly is poverty?
Aid groups say it means people who live on less than one or two dollars a day, which applies to about 20 per cent of the world’s population. Rich countries (in the OECD) define it as those who live on less than half of a country’s median household income.
But according to the World Bank, “Poverty is hunger and lack of shelter. Poverty is being sick and not able to see a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not having a job and living one day at a time...poverty is powerlessness and lack of representation.”
We doubt there are many Bahamians who fall into these dismal categories. Although there are clearly different levels of income, very few Bahamians are unable to help themselves or to get help.
The voluntary contributions that low-income people make to support the lifestyles of wealthy preachers, the expensive clothing and cars they buy, the lack of worker productivity, the careless reproduction of unwanted and uncared for children, the studied indolence of the boys on the block - they all point to a culture of irresponsibility and self-indulgence.
And even in our current economy, there are already lots of benefits for low income earners. In addition to handouts for the lower middle class like scholarships, mortgages and small business loans that are rarely repaid, there are the National Insurance benefits that are justifiably skewed towards low income earners. Not to mention our massive public health and education systems.
At the most basic level, our social safety net includes food stamps,
day-care, routine medical care, school lunches and uniforms, housing subsidies and work relief - all administered by the Department of Social Services. And this does not even take account of the various charities and service organisations whose members contribute so much time and money.
Three years ago, a government study shed light on the living conditions of Bahamian families for the first time; after interviewing some 2000 householders around the country. The level of absolute poverty was defined for the first time in our history.
Surprisingly to some, the main conclusion drawn was that there was very little real poverty in the Bahamas. And the conditions that contribute to it are relatively easy to address.
Poverty in the Bahamas was found to be less than in Barbados (with about the same size economy) and also less than in the United States (with its much larger economy).
To determine this, the study calculated the least amount of money needed to satisfy basic needs – and then looked at consumption patterns to set a national poverty rate of 9.3 per cent (or about 28,000 people – half of which are children).
Almost half of these very poor households are headed by single women, supporting five or more dependents. They rent substandard houses – less than half have piped water and about a third have no proper toilets.
As one would expect, proportionally more poor people live on the sparsely-settled southern islands, where there are few public services and little to do. Many eke out a traditional subsistence living, and there are more children and elderly for each working person.
According to the study, it would take $24 million a year to eliminate poverty in the Bahamas; about what we spend now on the Department of Social Services. That’s because the poverty gap – or average shortfall of a poor person from the poverty line – is only about $81 a year.
But subsidies alone won’t remove the differences in living conditions or other deprivations. The real keys to poverty reduction, the study says, are education and employment. And many analysts think these are better addressed without more government intervention.
Economists say better education will raise the productivity of some unskilled workers and increase the scarcity of the rest, raising incomes in both cases.
According to the study, a strong link exists between the level of education and the likelihood of being poor. About half of Bahamians with only an elementary education are poor, while less than 2 per cent of those with a college education are.
Most economists agree that individuals create wealth, not governments. But our government wastes hundreds of millions of dollars a year on state enterprises that are either complete disasters (like the post office, ZNS and Bahamasair) or that could be much more effective and profitable if they were left to the private sector (like BTC and BEC).
According to some analysts, the Bahamas is at a critical juncture and needs to get it right economically or face serious decline. And economic decline would mean a lot more poor people.
Our Gross Domestic Product (the value of our economic output) is about $5 billion and our population is about 300,000, producing a per capita GDP of $16,000. If we want to grow this income, we have two basic choices: either produce more, or cut the population.
The government already spends more than $235 million a year on social services and public health, education and housing (and has been doing so for decades). How effective is this spending? Are we getting value for money?
Look at education. There are about 50,000 students in 147 public and 47 private schools, but exam results show a serious imbalance between the public and private sectors. More than half of all students in private schools get good BGCSE grades compared to only about a quarter of public school students.
The living conditions study suggests several possible causes for this...teachers, school environment, access to supplies, and readiness of the students themselves. We have to determine which is more potent – and set about making the necessary changes...not simply spending more money.
As one observer put it: “Teachers, supplies etc, can make a difference. But the student's home environment is probably the strongest factor.
“If we had self-respect, we wouldn't accept negligence as the norm, and lack of accountability as the solution.”
Comments