Jagdeo and his Humpty Dumpty economics

Jan 28, 2025 Features / Columnists, Peeping Tom

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Kaieteur News – President Donald Trump’s infamous mantra of “Drill Baby, Drill” has been resurrected with a vengeance. By promoting rapid fossil fuel production, Trump aims to make the United States the unparalleled energy superpower, driving down the global price of petroleum in the process.

On the surface, this might seem like a boon for consumers, but beneath the surface lies a profound economic paradox. It is one that that not only threatens the U.S. but also Guyana, where Vice President Bharrat Jagdeo’s policies have been built on shaky assumptions that the world was moving towards Net Zero through a rapid transition to renewables.

Petroleum prices have long been long beholden to the dynamics of supply and demand Trump’s pledge to accelerate oil and gas production comes with the predictable consequence of flooding the market with supply.. Prices inevitably drop when production outpaces consumption.

For countries like Guyana, where oil revenue contributed 30% of last year’s Budget,  this spells trouble. Lower oil prices translate to reduced revenues, which in turn constrain future public spending. The government of Guyana thus could find itself in a fiscal quagmire when the tide turns against high oil prices.

In Guyana, Vice President Bharrat Jagdeo has championed an aggressive exploitation strategy for the country’s oil reserves, claiming a “narrow window” to capitalize on these resources before global demand wanes. This policy—an unwritten national depletion strategy—rests on the assumption that the world is pivoting decisively away from fossil fuels toward renewables. Jagdeo has argued that Guyana must act quickly to avoid being left with “stranded assets” in a post-oil future.

Yet Trump’s policies have thrown a wrench into this narrative. Not only has he once again withdrawn from the Paris Agreement, but he has also doubled down on his commitment to fossil fuels. In the process he has dismissed the global push for renewable energy transitions. By actively promoting policies to increase fossil fuel production in the United States, Trump has undermined the very premise of Jagdeo’s depletion strategy. The “narrow window” Jagdeo cites seems far from closing. Instead, Trump’s actions suggest that the fossil fuel era may be prolonged, albeit with significant price volatility.

In the United States, rapid drilling can lead to a glut in supply. This will push prices down. While consumers may temporarily benefit from lower gasoline prices, the long-term consequences are less rosy. Energy companies, in countries such as Guyana, facing financial pressure may scale back investments, lay off workers, and cut corners on safety and environmental standards. The ripple effects extend to government’s take of oil revenues. This can result in budgetary shortfalls and constrained public spending on critical services such as education, healthcare, and infrastructure.

Guyana risks walking this path. With its newfound oil wealth, the government has embarked on a spending spree, funding ambitious infrastructure projects and social programs. These investments hinge on the assumption of sustained high oil prices. Should prices plummet due to overproduction—whether by the U.S., OPEC, or other major players—Guyana’s fiscal house of cards could come tumbling down. The consequences for public services and economic stability would be dire.

Trump’s and Jagdeo’s policies highlight a stark incongruity. Jagdeo’s rush to exploit Guyana’s oil resources was premised on the belief that global momentum toward renewables would render fossil fuels obsolete. But Trump’s actions have undermined this logic.

Jagdeo’s position now appears not just precarious but almost comical. His insistence on sprinting to deplete Guyana’s oil reserves—while ignoring the risks of price volatility and overdependence on a single revenue stream—seems ill-conceived considering Trump’s aggressive energy agenda. The narrative of a “narrow window” has been exposed as speculative at best, leaving Guyana vulnerable to the whims of global markets.

Trump’s energy policies have exposed the flaws in Jagdeo’s approach. The “narrow window” narrative, already tenuous, now appears baseless in the face of a prolonged fossil fuel era. Guyana’s policymakers must adapt to this new reality, recognizing that the world’s energy future is far more complex and uncertain than Jagdeo’s rhetoric suggests.

When planning for a country’s future, economists such as Jagdeo, must take into consideration political factors – such as a change in leadership in the United States as has happened with the re-election of Trump. Jagdeo’s misreading of “geopolitical smoke signs” highlights the cost of relying on speculative narratives rather than grounded analysis.

Sadly, it is not Jagdeo or his administration who will bear the burden of these errors but the ordinary Guyanese people. They will pay the price in unrealized revenues and shattered dreams of prosperity.

 

 

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• Bharrat Jagdeo, consumption, Drill Baby, renewables, Trump, undermined

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