keith-duncan

EPOC Co-Chair Recommends Another Oil Hedge

Newly-appointed Co-Chair of the Economic Programme Oversight Committee, EPOC, Keith Duncan, is recommending that the government consider another oil hedge.

He says this would be ‘only prudent’.

Mr. Duncan made the comments today as he chaired his first press conference as EPOC Co-Chair.

Mr. Duncan has made his recommendation as the Organization of Petroleum Exporting Countries, OPEC, has agreed to cut oil production, starting in January. It’d be the first supply cut in eight years, and comes after more than two years of depressed oil prices due to a supply glut on the market.

However, this has helped many countries, like Jamaica, which heavily import oil.

A cut in oil production by OPEC will most likely cause oil prices to increase.

As such, Mr. Duncan believes it’s now wise for the government to again consider hedging.

The previous government had taken out an oil hedge with Citibank.

Today, Mr. Duncan sought to assure that there’s some room for the country to cope with an increase in oil prices.

This, as he says the macro-economic numbers are looking good, with the current account deficit at historically low levels and the fact that the country now has adequate supplies of US dollars in reserve.

He also noted that the new three-year Precautionary Standby Agreement with the International Monetary Fund, IMF, provides some cushion against oil price volatility.

But even so, Mr. Duncan says if oil prices were to go back up to pre-2014 levels, costing upwards of 80 US dollars per barrel, this would affect the government’s budgeting and projections.

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  • dorlanhfrancis

    Hedging my friend is a waste of money. The Wall Street slick willies will set premiums based on perceived risk. So if prices are trending up they are going to have high strike price and or high premiums. If the strike price is low the premiums will be very high. Because of that pricing mechanism which favors the house it is a waste of time to hedge.