–economist outlines policy solutions to tackle energy volatility

GUYANESE economist, Richard Rambarran, has outlined a series of policy approaches he believes could help Caribbean nations better navigate rising energy volatility, pointing to Guyana’s fuel pricing model as a leading example for the region.

Speaking on a recent episode of the Caribbean Business Review, Rambarran examined the geopolitical and economic pressures shaping energy markets, while highlighting how targeted policy decisions can cushion the impact on consumers.

From a Guyanese perspective, he argued that one of the country’s most effective mechanisms is the role played by the state-owned Guyana Oil Company (GuyOil), which acts as a market leader in the downstream petroleum sector.

According to Rambarran, GuyOil helps to stabilise prices by setting a benchmark that private fuel providers tend to follow, thereby reducing the risk of anti-competitive pricing or artificially high costs.

“This avoids situations where downstream providers operate in a way that keeps prices elevated when they shouldn’t be,” he explained, noting that such a model could be instructive for other Caribbean countries that lack a strong state presence in the fuel distribution market.

The importance of government policy in sustaining price stability was highlighted by him. He pointed particularly to the strategic use of fuel taxation—especially adjustments to excise duties—as a key fiscal instrument.

Since the onset of the Russia–Ukraine conflict in 2022, Guyana has reduced its fuel excise tax from about 30 percent to zero, where it has remained in recent fiscal years.  Rambarran described this as a “prudent” measure that has helped protect consumers from the impact of global price shocks.

He explained that such fiscal flexibility enables governments to influence prices at the consumer level while absorbing some of the volatility generated by international energy markets.

It is his view that Caribbean nations could strengthen resilience by creating financial buffers within state-owned oil companies, providing a cushion during periods of price fluctuations.

In periods of surplus, these entities could set aside funds that can later be used to offset price spikes, effectively smoothing out commodity cycles. “This is about ensuring that when shocks occur, they are not transmitted in full to consumers,” he said.

Looking ahead, he also floated the possibility of using Guyana’s sovereign wealth resources as an additional stabilising mechanism in the event of sustained energy shocks.

He suggested that funds could be deployed to support targeted fuel subsidies or even to offset costs through negative excise adjustments.

Such measures, he noted, would align with the broader purpose of sovereign wealth funds which is to provide economic stability during periods of uncertainty.

From a wider Caribbean standpoint, Rambarran maintained that the region must adopt more coordinated and forward-looking policies to manage energy risk, particularly in the face of ongoing geopolitical tensions and fluctuating global oil prices.

He stressed that Guyana’s approach demonstrates how fiscal discipline and strategic state intervention can work together to protect consumers while maintaining market balance.

“Guyana sets a very important example for the region to follow. Guyana represents a good example of how fiscal responsibility can translate into smoothing out price volatility and ensuring that commodity cycles and shocks that ensue are not tremendous,” the economist noted.

According to him, Caribbean economies will continue to face exposure to global price shocks unless decisive action is taken to strengthen energy security.

Rambarran said the structure of Caribbean economies—largely small, open, and deeply integrated into the global system—makes them inherently dependent on international commodity prices.

He explained that this dependence leaves countries particularly vulnerable to fluctuations in global markets, especially in critical sectors such as energy.

“Structurally, our economies within the Caribbean… will almost always face this problem of being price-dependent, international price-dependent, commodity price-dependent,” Rambarran said, noting that this reality persists unless fundamental policy changes are made.

According to the economist, the issue is rooted in the region’s economic design, where external forces often dictate domestic price levels. As a result, countries across the Caribbean remain exposed to volatility in global oil and energy markets.

However, Rambarran stressed that this vulnerability is not solely structural. He argued that the region has not been sufficiently proactive in addressing long-term energy challenges.

“Whilst structurally we are oriented to being exposed to global vulnerabilities, I believe that over time… we have not been as deliberate as we ought to be in terms of securing our energy future,” he stated.

To strengthen energy systems and reduce dependence on imported fuels, he emphasised the need for clear, coordinated action from policymakers across the region.

Rambarran noted that, in a world where energy prices can change quickly and unpredictably, Caribbean countries would benefit from working together more strategically to plan and manage their energy needs. Such a unified approach, he said, could help soften the impact when global markets become unstable.

His remarks reflect ongoing concerns about how fluctuating energy prices continue to affect everyday life in the Caribbean, from rising costs of goods and services to broader pressures on inflation and economic stability.

He cautioned that unless governments take real steps to reform and invest consistently in energy security, the region will likely remain caught in a cycle of vulnerability, repeatedly exposed to the ups and downs of global energy prices.

He emphasised that addressing these challenges will require both an acknowledgment of the structural realities facing Caribbean economies and a stronger commitment to long-term energy planning.

Moreover, Rambarran noted that the emergence of Guyana and Suriname as significant producers of Liquefied Natural Gas (LNG) could help deepen energy co-operation across the Caribbean and allow benefits in one country to extend throughout the region.

The economist said that LNG from Guyana and Suriname could help the Caribbean navigate global energy market instability.

“The addition of Guyana and Suriname and the potential vastness of LNG there really help with the problem of interconnectedness among Caribbean territories and how they are then able to ensure that benefits arising from one country can also have concomitant benefits in sister Caribbean territories. LNG is one of the most exportable forms of energy,” he noted.

He proposed the idea of issuing an LNG-backed bond in the Caribbean, supported by regional governments, to help finance modular refineries and LNG infrastructure aimed at strengthening export capacity across the region.

“Those are things I have not heard being discussed as yet.”