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There is no substitute for energy. The whole edifice of modern society is built on it. It is not “just another commodity” but the precondition of all commodities, a basic factor equal with air, water and earth.- E. F Schumacher (1973)
GLOBAL CONTEXTMr. Speaker, the energy sector is a major part of the global economy and has been the focus of much discussion in recent months. We need to have an understanding of what is taking place and the impact of oil on emerging economies, such as Jamaica.
World DemandIn 2007, world demand amounted to 86 million barrels per day. The demand is trending upwards while at the same time there is a decline in the rate of new discoveries.
There is also the constant fear that the supply of this commodity may be disrupted either by acts of God or man. It is important to note Mr. Speaker, that the majority of the world’s oil reserves are located in regions that are politically unstable and subject to tension.
The fundamentals of demand and supply are also being distorted by Paper Traders. Stock positions are taken up online and traded without actual money passing through the traders’ hands. Additionally, the weakening US dollar has created a window for traders to turn oil, this finite product, into the new currency. The market, therefore, is vulnerable to the mere hint of a disruption in supply.
These are the factors driving the price of oil upwards and creating A CRISIS OF CRUDE.
We have no control over these factors but we must find a solution. The answer, Mr. Speaker, is to break our dependency on oil.
A dependency that is crippling us.
The statistics are stark.
The total amount of oil imported in 2007 was 29.9 million barrels compared with 30.9 million barrels in the previous year. The reduction resulted largely from a marginal decline in production in the bauxite alumina sector influenced largely by Hurricane Dean. Mr Speaker, we should note that even with this reduction in import volume the cost to import increased from US $1.84 billion to US $2.01 billion.
How was the commodity used?
21% of the volume imported was used for road transport, 23 % in the generation of electricity 6% for other manufacturing and 50% supported the export sector in the areas of bauxite and alumina production and for marine and aviation travel.
Given that over 90% of our energy is from imported oil in a market that is volatile and growing even more expensive, it cannot and will not be business as usual. Change oftentimes comes in the crucible of the challenge. We have a choice . do we behave like the rabbit caught in the headlights or do we see this crisis of crude as an opportunity?
We Mr. Speaker, see opportunities.
Starting today, we will grasp every opportunity that each root of cane offers in a new sugar cane industry. Not only for rum and sugar anymore but energy. Energy for the transport and electricity sectors.
Mr. Speaker I am pleased to advise that by the end of this year, ethanol blended fuel will be available in service stations for the motoring public. As a first step, we will replace 10% gasoline with ethanol – E10. Jamaica will not be the first country to do this and, if anything, Mr. Speaker we have waited too long. Over 23 countries have implemented this project. Brazil started in the 1970s as a response to the first oil crisis. They refused to be held hostage and as this challenge faces us neither shall we.
Mr. Speaker, we have been having dialogue with the key players in the petroleum sector since October last year and our team, including logistics experts from Brazil, has been working diligently to ensure the smooth and effective transition and operation of this giant step towards breaking the dependency. One constraint, however, is appropriate storage facility in the western region of the island but the nature of the challenge is such that we must respond now. We have committed $300M to this project and equipment has already been ordered and the construction of the storage facility will commence shortly. We expect the facility to be completed by year end and we will be mandating the islandwide use of E-10 effective April next year.
In the interim, Mr. Speaker, E10 will be introduced on a phased basis beginning in the corporate area and the parishes of Clarendon, St. Catherine, St. Thomas and Portland. Leading by example, the government will ensure that the E10 blend is used in all government vehicles within a few months.
Approximately 4.5 million gallons of gasoline is used on an annual basis, a 10% substitution will be significant.
Mr. Speaker, it is important for us to understand that E10 is fully compatible with the existing gasoline blends. The experts have assured us that the motor vehicles in the island can readily use E10. A public education campaign will be launched shortly to provide more information on the project. WE ARE FUELLING CHANGE!
We already have the capability and expertise to produce ethanol that meets world standards and can be used to make E-10. Petrojam Ethanol, one of the 3 dehydration plants in Jamaica, exported 27 million gallons of ethanol to the United States under the Caribbean Basin Initiative (CBI). (I would like to use this opportunity to thank the government of the United States for providing us with this opportunity).
Mr. Speaker the government is divesting its sugar holdings. The selected bidder, Infinity Bio- Energy, is a company out of Brazil. What may not be known Mr Speaker is that this company is also one of the leading producers of ethanol in Brazil. This is not second hand knowledge. I visited and viewed the operations of the company and I am pleased to report that their knowledge and expertise of the industry, including the use of ethanol in motor vehicles, is very impressive.
Infinity uses sugar cane as a source of energy and as a sugar crop. Likewise, the sugar cane in Jamaica will be used not only to produce sugar but also ethanol, on a commercial scale, and the bagasse and other by-products to generate electricty.
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