Guyana Is Having A Petrostate Moment

As the Gulf War Causes Energy Woes Around the World, Guyana’s Having a Petrostate Moment GUYANA Guyana The US recently seized the oil tanker Majestic X in the Indian Ocean, saying the Guyanese-flagged vessel was carrying Iranian oil. Guyanese officials claimed the ship fabricated its registration. But the incident underscored Guyana’s rising profile as a player in the global oil trade. Following ExxonMobil’s massive 2015 discovery of over 11 billion barrels of recoverable oil in the Stabroek Block, Guyana rapidly became one of the world’s fastest-growing economies, with crude production propelling unprecedented GDP growth. The Stabroek Block, about 120 miles offshore, is operated by ExxonMobil with Chevron and the Chinese state-owned China National Offshore Oil Corporation (CNOOC), and holds most of Guyana’s reserves. This newfound wealth now dominates Guyana’s economy, turning the country into one of the top oil producers per capita in just a few years. Its gross domestic product growth has been among the highest in the world over the last five years, according to Rice University’s Baker Institute. Guyana’s oil revenues are now on track to hit $33 billion annually, which is 75 percent more than forecasters expected before the US-Israeli war against Iran and the shutdown of oil traffic through the Strait of Hormuz. Add the premium that Guyanese oil exporters receive from their main clients in Europe, and returns have surged far beyond earlier forecasts. But the boom is also pushing up costs at home. Guyana faces a significant risk of the resource curse, where abundant natural resources paradoxically lead to poor economic development, high income inequality and corruption. Even as Guyana exports crude, it remains exposed to global prices, importing refined fuels whose costs rise with international markets. Higher fuel prices feed into transport and electricity, pushing up food costs in a country reliant on imports, while surging demand outpaces housing and supply. As a result, inflation is rising even as growth accelerates, with oil accounting for three-quarters of GDP and the price shock set to deepen that reliance, said Radhika Bansal of Rystad Energy. “The cost of food and housing has increased by 75 percent since 2021. The oil industry poaches the best workers. … A flood of petro dollars has encouraged waste, if not outright clientelism,” the Economist wrote. To ease these pressures, Guyana’s President Irfaan Ali has announced cash grants of $100,000 to more than 240,000 people as part of his policy to share the wealth directly with citizens. Ali has also invested heavily in social programs. He plans to build a refinery so the country can produce its own fuel and potentially export finished products, arguing that national security requires Guyana to achieve energy and economic independence. Meanwhile, Guyana is locked in a long-running territorial dispute with Venezuela over the Essequibo region, a vast area administered by Guyana that is rich in natural resources and has gained fresh strategic importance with recent oil discoveries. “Strengthening military, economic, and diplomatic support for Guyana aligns with US national security interests given Guyana’s growing role as an energy producer, its strategic location, and its leadership among democratic nations in the Caribbean,” wrote the Council on Foreign Relations. For now, however, the domestic picture tells a different story. Despite the country’s oil boom, many Guyanese say the gains have yet to reach those on the margins. Data from the Inter-American Development Bank indicates that 58 percent of the country’s roughly 800,000 people live on less than $6.85 a day, with 32 percent surviving on under $3.65. Rajesh Singh, a 46-year-old painter and maintenance worker, said the oil boom has done little for ordinary people like him. “People must live comfortably now that we have big oil money, but it is clearly not happening yet,” he told the Guardian. “The big boys are looking after themselves too much.”