The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.
By Dr. Philip Castillo: Exactly two months after the start of the US/Israel vs Iran war, Belizeans remain rightly fixated on the ever increasing cost of fuel at the pump. Belize imports virtually every drop of fuel that it uses and even though the oil we import does not pass through the Strait of Hormuz, fuel is priced globally, and therefore what happens in that vital part of the world, affect pump prices all across Belize.
And in Belize, perhaps more than elsewhere, pump prices are a political issue because of the overwhelming dependence of Governments of Belize on taxes on fuel. Imported fuel attracts at least six different taxes, some of which are cascading. As administered in Belize, taxes on fuel – at least the fuel that is legally imported – has a high compliance rate since the quantity imported can be easily verified at source, taxes applied and payments received. Belize’s many gas stations also pay business taxes, GST and possibly income taxes on earnings of their owners/shareholders. Based on the ongoing budget, over 92% of GOB revenues are derived from taxation and fuel is by far the most important item in the tax basket. These are known fiscal realities that politicians quickly realize upon attaining incumbency.
And so then, Belize’s political leaders have always had very limited maneuverability…the higher acquisition costs of fuel provides a revenue boon since many of the fuel taxes are calculated as a percentage of the acquisition cost. But then as higher fuel prices work their way in an import dependent economy, inflation also rises, thereby decreasing the competitiveness of our exports, similarly decreasing the appeal of our tourism product and igniting wage demands. While increasing acquisition costs provide an initial revenue boost, it is quite likely that as the costs work through the system, they eventually outweigh the illusory benefits.
At any point in time, the supply of fuel in storage is finite and this presents an even more dire challenge for marginal purchasers such as Belize. As the war reduces its availability, larger and richer countries, as bulk purchasers, will bid up the price essentially crowding out small importers such as Belize.
But in every crisis, there is opportunity. While our fixation on fuel prices is understandable, it should be short term. Astute leadership would take the opportunity to use this crisis to reduce our dependence on a commodity so crucial to our economic fortunes but whose price and availability is totally outside our control.
We know that there are alternative sources of energy and challenging as it will be, Belize must start the process of focusing on these alternative energy sources. A perusal of the most recent annual report of our monopoly electricity distributor, Belize Electricity Limited, indicates that Belize sources its energy from five sources – Mexico, hydro, co-generation, diesel and solar. Solar is by far the smallest. Hydro and solar are renewable. Hydro will have its challenges in an era of climate change and changing weather patterns, but the sun will shine tomorrow. And the day after.
Belize is blessed with sunshine all year round; public policy must be directed towards rapidly increasing the use of solar in our energy mix. BEL’s annual report also indicated that the company made a loss last year. Perhaps a road to profitability could be either BEL forming a subsidiary company or partner with the existing solar providers to, import and install solar panels, first on public buildings and then on the households of many of its nearly 114,000 customers. GOB’s commendable move towards EV vehicles should be accelerated. I understand from colleagues at The University of the West Indies, that in parts of Europe, EV owners with solar panels on roofs store power in batteries. Their cars are then charged at night from these batteries such that the owners get free motoring for the next day or days. If we can understand the logic of strategic tax policy for tourism and manufacturing, surely we can understand its logic for energy resilience.
Initial financing can be sourced from our financial institutions which remain flush with cash. Customers would repay via a surcharge on their existing electricity bill. But properly amortized, the surcharge will reduce as their own solar substitutes power from BEL. There are likely to be optimistic scenarios whereby customers can also sell electricity to the national grid.
Undertaking the above has its challenges. But consider the alternatives. We don’t know when the war in the Middle East will end. What we know is that when it ends, the costs of reconstruction will be huge and the status quo ante is unlikely to be restored. Prices are likely to be inelastic downwards. But even when the war ends, we don’t know when another will flare in a region marred by religious fundamentalism. It was French Enlightenment philosopher Voltaire who said something to the effect that if you can get people to believe absurdities, you can get them to commit atrocities.
Belize is at an energy crossroads. We can undertake activist public policies to minimize our dependence on imported fossil fuels …or await the expected consequences of doing nothing.
Dr. Philip Castillo is an economist and a retired Assistant Professor at the University of Belize, where he introduced and taught a course in Petroleum Economics.
The post Belize: At the Crossroads of an Energy Policy appeared first on Belize News and Opinion on www.breakingbelizenews.com.
The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News. By Dr. Philip Castillo: Exactly two months after the start of the US/Israel vs Iran war, Belizeans remain rightly fixated on the ever increasing cost of fuel at the pump. Belize imports virtually every drop of
The post Belize: At the Crossroads of an Energy Policy appeared first on Belize News and Opinion on www.breakingbelizenews.com.
