This Is Guernsey

By Joel de Woolfson

Crude oil pumping station - nodding donkey.

ECONOMIES around the globe will be affected by the continued high cost of oil and Guernsey’s will also suffer, the Policy Council’s strategic adviser on economics has warned.
Crude oil was selling at $130 a barrel yesterday and Andrew Birnie said the cost of oil-based products would inevitably rise and squeeze consumers’ spending power.
‘If energy prices continue to rise then it will obviously have an inflationary effect, as it will around the globe,’ he said.
Some analysts claim the price could rise as high as $200 a barrel during the next 18 months.
The impact of rocketing oil prices is continuing to feed through into the wider economy.
Prime Minister Gordon Brown this week announced plans to increase North Sea oil production by 50,000 barrels a day and he was joined in his concerns about the situation by American president George Bush and president Nicolas Sarkozy of France.
Mr Birnie said: ‘It’s inevitable that political pressure on oil-producing countries to increase supply will be stepped up. Whether this will have any effect in the short term is difficult to say.
He said that if demand for oil continued to rise, so would the price.
‘But if consumers purchase fewer oil-based products, demand will slacken,’ he said. That could prompt more oil to be made available and a fall in the price, he said.
‘There are some commentators who believe that high oil prices will inevitably dampen demand as businesses and individuals start to limit the use of energy and “buy” time for alternatives to come on stream, such as renewable energy – wind, wave/tidal and solar,’ he said.
‘Obviously there is a time lag here and it very much depends on the speed of change in the so-called “fourth technological revolution” and to what extent Guernsey has a role in it.’
Mr Birnie said a Guernsey renewable energy commission could be created as part of the energy policy report that is due to go before the States. He added that billions of dollars had been invested to try to develop a low-carbon global economy.
‘One example is Richard Branson’s consortium to develop biofuels, primarily to replace oil-based aviation fuel,’ he said.
Guernsey will certainly feel the effects of the continued high cost of oil but there are opportunities for the island to become more self-sufficient, Mr Birnie added.
‘In common with other jurisdictions, there may well be some pain with the inevitable transition from an oil-based economy to one that is less so,’ he said.

Article posted on 31st May, 2008 - 11.55am