Global oil supply concerns and rising price could bring new pressures to St. Maarten

GREAT BAY--St. Maarten households and businesses could face renewed pressure from higher fuel and electricity costs as global oil inventories continue to fall and crude oil remains above US$100 per barrel.

Brent crude, the major international benchmark, closed Friday, September 18, at US$104.87 per barrel, while U.S. West Texas Intermediate crude closed at US$100.30 per barrel. The elevated prices come as the global oil market continues to deal with supply disruptions and sharply reduced inventories.

The International Energy Agency reported this month that global observed oil inventories had declined by approximately 507 million barrels since February, reducing the cushion available to absorb further disruptions.

For St. Maarten, the concern is direct. The country imports the petroleum products it consumes and remains heavily exposed to movements in international oil prices.

A sustained increase in global prices can eventually affect local gasoline, diesel and cooking gas prices through St. Maarten's regulated maximum-price system. The effect can also reach electricity bills, since NV GEBE uses imported fuel to generate electricity and changes in fuel costs are reflected through the fuel clause.

Residents have already experienced several petroleum price adjustments this year, showing how quickly international developments can reach local consumers.

The concern now is that global inventories are substantially lower at a time when oil is again trading above US$100 per barrel. That leaves less room for the international market to absorb another major supply disruption without prices moving higher.

Another sharp increase is not guaranteed. Oil prices remain volatile and can rise or fall depending on production, demand, geopolitical developments and shipping conditions.

However, St. Maarten households may want to leave additional room in their budgets for gasoline, electricity and transportation. Businesses with significant fuel, delivery, refrigeration, electricity or generator expenses should also be mindful of the possibility of higher operating costs.

Higher energy prices can eventually spread throughout the local economy as transportation and operating expenses are reflected in the cost of imported goods and services.

Government indicated earlier this year that it was examining fuel-relief measures and a longer-term mechanism for responding to significant international fuel-price fluctuations.

With crude above US$100 and global oil inventories significantly depleted, developments on the international market will be important for St. Maarten to monitor in the weeks ahead.

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