Energy Minister says he expect energy prices to be halved by 2016, is it possible ?

Yesterday, the energy minister said he believes electricity cost in Jamaica will be cut in half over the medium to long term (2016-2018), based on the price quoted by Azurest Cambridge as well as a raft of other measures being implemented to lower the cost of energy.

“The price that has been put on the table will enable a significant reduction in the price of electricity by 2016. That will see us closer to our objective of between US0.15 and US$0.20 cents,” Paulwell said.

 

Now I am not sure on what basis and with what level of certainty can the Energy Minister make the above statement, given that 2016, is close to is 3 yrs now and he has no idea where the price of fuel will be by then. We can therefore assume that it’s either wishful thinking on the part of  Phillip Paulwell or has meet with the potential bid winner and they have already indicated they have secured  forward buying  of LNG ( LNG Futures)for the next few years at guaranteed prices, which closely reflects today’s spot market prices.

Let’s just take a quick look at LNG prices for the last 23 years to see what the trend has been like and what we can possible predict about future energy prices.

Natural Gas prices rallied 1.01 USD/MMBtu or 37.41 percent during the last 12 months.

Source : Trading economics

 

If prices continues to rise at this present rate, then we could very well not see the big reduction in energy prices, which has been predicted by the Energy Minister.

BTW – the politics of Jamaica dictated that the show must go on now, so the power plant can be delivered allowing the  process tobe completed just in time for the 2016 election campaign saying ” we promised you lower energy prices and we delivered, a promise made a promise kept”.  That I am told is the strong motivating factor for the Minister being so involved in the process and in so doing attempting to influence the outcome.

As one man said, Jamaica has one singular problem , which in turn morphs itself into as multiplicity of other problems and it’s called “politics”.  Politics decides everything in Jamaica and most  decisions are made based on the need to either keep the party in power or to get them into power.