IF you weren’t looking for it, you might have missed the incredibly positive news that oil prices have just ticked above $80 a barrel for the first time in several years.
I say positive as Guyana is set to become an oil producer, and not from the perspective of those on our roads who may eventually feel an upswing in prices. But what has slipped by the national conversation on the oil industry is that, for the most part, estimates have been using $50 or $60 a barrel of oil to project, whereas this new price represents at minimum a 30% rise in gross estimates.

So why the jump in prices, and will this last? One of the defining aspects of the Trump administration is that due to the rapid development of events, the full implications of his actions are not always immediately grasped. Who would have predicted that Trump’s bellowing voice would not just buffet Iran, but end up a light breeze in Guyana.
After all, his pulling out of the Iranian sanctions deal means they may not be able to export their oil as desired, and that has pushed the international price up.

Given that Saudi Arabia has expressed a desire to see oil at around $80 a barrel, and is Iran’s bitter rival, there is certainly great reason to be optimistic. Even further, while Trump may soften sanctions, allowing French company Total to continue operations in Iran unhindered, Trump has long expressed deep loathing for the Iran deal, going as far as saying it embarrasses him as “a citizen”. That he will allow the Iranian regime latitude is therefore very unlikely.

But doesn’t that mean the Iranians’ loss is our gain? This raises the issue of the US-Guyana relationship, which will no doubt be a core challenge that every Guyanese leader must navigate. After all, given we have a large local Muslim population we must be respectful of their views on such international conflicts, and be sensitive to the strife and suffering in the Muslim world.

We may not be able to influence US policy on an issue of this scale, but it would not be appropriate to celebrate without consulting our brothers and sisters locally.
And so we now wait to see whether $80 oil will remain, and must surely question whether this means we need to adjust our own spending expectations in the oil economy. Some reports put ExxonMobil at break-even point at $35 a barrel, which means there will be $45 of profit oil at these prices.

If our previous calculations were done at $50 a barrel with profit oil at $15, then this means three times much profit oil for Exxon and Guyana to divide.
We’ll see what the final numbers work out to be, closer to first production, but if our estimates lag behind the latest developments, then we must surely ask what the Guyana government should do with three times as much oil revenue. That would correspond roughly to 24 years of gold revenue, every single year, to put it into perspective.
If these prices hold, even further, this would imply oil revenue would be more like 60% of the government budget rather than 20% as currently projected.

This all provides much food for thought, and is an exercise in what corporations call ‘blue sky’ thinking, that is, imagining what the best possible outcome is, and then working toward that objective. My suspicion is that prices will hold at or near this level, unless there is a major political event, like the Iranians capitulating, or regime change in Venezuela.
And if this is the case, then when we really do increase production to 500,000 barrels a day in the mid-2020s, Guyanese will struggle to spend these revenues.
Much as Venezuela, at its height, was the regional centre of gravity, Guyana is likely to begin to fill such a role. Our responsibility, however, is not to let such windfalls waste, above all, emphasising investment and developing our people.
If we do so, keeping corruption and internal strife at bay, the sky really is the limit. It’s been a long, hard road since independence, but, hopefully, we’ve learned important lessons. Now we march.