Dependence on Fossil Fuels

Decades of fossil fuel dependence, increasing levels of domestic debt, and foreign profiteering have prompted many Caribbean nations to reevaluate strategies to enhance the sustainability of energy generation. Energy is a vital part of daily life, as it is both a contributor and function of economic growth and development in general. Without energy, the world as we know it would not be able to function. As a pervasive component of human activity and global development, energy fuels all aspects of modern society. On the other hand, when sources of energy become unsustainable or too costly, society cannot adequately provide basic goods and services to ensure current and future generations are able to support high levels of livability. Throughout the developing world, and particularly in isolated Caribbean nations, the linkages between economic growth and energy production have contributed to a well-documented history of challenges.

The high cost of energy in the Caribbean has historically been a prime factor that has hindered development and reduced economic competitiveness. For the past two decades, serious inefficiencies in the energy sector and dependence on imported fossil fuels has kept the cost of electricity throughout the Caribbean at persistently high levels when compared to other nations around the world (McIntyre et al, 2016). Over the past forty years, energy use in Latin America and the Caribbean has more than tripled from 248 million tons of oil equivalent (MTOE) in 1971, to 848 MTOE in 2013, which represents more than eight percent of the increase in the global energy demand over the same period (Balza et al, 2016). During this period of time, fossil fuels like coal, oil, and gas have dominated the energy sector in this region of the world by fueling 68.9 percent of all primary energy demand in 1971, which increased to 74.4 percent of energy generation by 2013 (Balza et al, 2016). The increasing dependence on fossil fuels to power everything from transportation systems to electricity generation has led many Caribbean nations to develop plans to shift to more cost-efficient and sustainable forms of energy generation.

Shaped by Geography

The Caribbean is a region that has largely been shaped by its geographical characteristics and history of American and European imperialism. Individual island geographies and key contextual factors like the unique natural resource endowments, infrastructural landscapes, isolated economic relationships, and widespread territorial sovereignty have shaped energy systems in the Caribbean (Popke and Harrison, 2018). The uniqueness of the region created a series of complex and multi-relational economic systems that have led to geopolitical challenges and limited opportunities for self-sufficient energy generation. Since the Caribbean archipelago has long been isolated from high levels of economic growth and development, energy researchers believe that recent technological developments may lead to a looming energy transition for the region as a whole.

Throughout the mid-twentieth century, American utility companies worked on small-scale utility projects throughout the Caribbean to install rural electric cooperatives and monopoly utilities (often without any regulation) with U.S. technology and capital from American investors. The installation of inefficient fossil fuel power plants ensured that Caribbean nations would be dependent on the U.S. for fossil fuels, which generated consistent returns for investors. Since American companies supplied the fossil fuels and the accompanying infrastructure for grid wires and electric poles, increasing energy consumption in the Caribbean led to high profits and immense returns for American investors. Under nearly total control from U.S. energy companies, the Caribbean became a major peripheral consumer and processing center for U.S. oil interests (Gustafson, 2017).

The Development of Energy Outposts

In the years after the Panama Canal became fully operational in the early 1900s, the Caribbean was able to become a vital energy outpost for colonial governments and multinational oil companies. As new global shipping lanes started to emerge, oil depots and fossil fuel refineries started to spring up throughout the region. During the height of World War II, the Royal Dutch Shell oil refinery on Curaçao became the largest refinery in the world, which was followed closely by Standard Oil of New Jersey’s refinery on the island of Aruba (Bond, 2017). These two refineries alone supplied over 80 percent of the Allies’ aviation and naval fuel, and ultimately attracted concerted attacks from German U-boats. Following the post-war period, rising regulatory concerns over municipal pollution in the U.S. led to even more fossil fuel refineries being constructed throughout the Caribbean, where lenient environmental regulations and less political opposition allowed for oil companies to sidestep rising environmental oversight and the demands of American labor unions.

Following a series of initiatives championed by the U.S. Congress in 1965, a new series of tax exemptions were created that encouraged American oil companies to build new export-oriented oil refineries and petrochemical plants throughout the Caribbean territories. From 1965 to 1985, more than a dozen new oil refineries were built in the Caribbean (Bond, 2017). During this period of time, international organizations like the World Bank strongly encouraged the Caribbean nations to welcome petroleum-related investment opportunities in order to stimulate economic growth throughout the region.

The Importance of Caribbean Refineries

Following the American oil embargo initiated by the Organization of the Petroleum Exporting Countries (OPEC) from 1973 and 1979, the Caribbean became even more of a vital outpost for the American economy. By 1990, roughly one-sixth of all the oil consumed by the U.S., and over half of the refined oil imported to the U.S. (including oil from Middle Eastern and African countries), passed through Caribbean refineries (Richardson, 1992).

From 1950 to 1990, the establishment of a sophisticated system of Caribbean oil refineries reshaped the political economy of the region and enabled American oil companies to develop a route to import crude oil and other fossil fuels to America. Without these refineries, the U.S. economy would not have been able to grow as effectively as it did during the post-war period. Moreover, the Caribbean oil outposts were also seen as vital pieces of infrastructure during World War II.

While the oil refineries contributed to a robust American economy and support efforts during World War II, the industry did little to help local citizens in the Caribbean. Even though international organizations predicated that new oil refineries would have helped to grow the Caribbean economy, many of today’s economists believe that the industry ended up causing more harm than good. Following the development of new refineries throughout the Caribbean, many islands experienced a spike in unemployment, increasing levels of government bureaucracy, and periods of intense social unrest (Pantojas-Garcia, 1990).

Environmental Impacts

In addition to creating economic tensions in the Caribbean, the fossil fuel industry ultimately led to many devastating environmental impacts. One of the most well-known environmental disasters occurred in 1973, when the oil tanker S.S. Zoe Colocotroni departed Venezuela with a load of crude oil bound for a refinery in Puerto Rico. After slamming into a reef off the southwestern coast of Puerto Rico, the massive load of crude oil was dumped into the ocean and drifted into the Bahía Sucia estuary, where it made its way into an extensive mangrove forest. After nearly the entire forest died, the region’s marine life continued to suffer for many years. Marine biologists and other environmental researchers concluded that the loss of the mangrove forest led to a detrimental rippling effect throughout the ecosystem, which has unfortunately had a lasting impact on the region.

Recent studies conducted by the United Nations Educational, Scientific and Cultural Organization (UNESCO) have concluded that 80 percent of marine life is directly or indirectly dependent on mangroves (Bond, 2017). Moreover, while mangroves make up less than a single percent of the world’s surface area, scientific estimates suggest their ecological footprint impacts nearly a half of the Earth’s natural resources (Costanza et al, 1997). Mangrove forests provide critical habitat for birds, mammals, reptiles, amphibians, fishes, and invertebrates. Additionally, these ecological features provide abundant shoreline stability during storm events by helping to reduce landscape erosion. While mangrove forests once flourished along the coasts of nearly every Caribbean island, the development of coastal fossil fuel refineries has contributed to the collapse of this vital ecological feature. Since many Caribbean refineries were built on top of former mangrove forests, the rise of the fossil fuel industry in a region with lenient environmental regulations has contributed to the direct destruction of these ecosystems.

Decades of Oil Pollution

While the direct construction of fossil fuel refineries had an immediate impact on Caribbean landscapes, the continued operation of these facilities has furthered environmental decline in the decades following the construction of the refineries. Studies have shown that a single mid-sized refinery constructed during the 1960s would have been expected to leak about 15,000 barrels of oil annually into the surrounding environment (Gorman, 2001). Furthermore, during the 1970s, the Caribbean experienced more than 30 known oil spills, two of which were among the largest oil spills in human history. In February 1979, two fully loaded supertankers collided off the coast of Trinidad and Tobago, spilling nearly 2.1 million barrels of crude oil. Only a few weeks later, an oil well off the coast of the Yucatan Peninsula experienced a major blowout that spilled over 3.6 million barrels of crude oil into the Gulf of Mexico.

Following decades of building infrastructure for fossil fuels, countless environmental disasters, and uneven economic growth, nearly 90 percent of the Caribbean’s electricity still comes from imported oil (Gustafson, 2017). Out of respect for the many decades in which the U.S. took advantage of numerous Caribbean nations for the development of oil refining infrastructure, the Obama administration launched the Caribbean Energy Security Initiative (CESI) to focus efforts on renewable energy generation in the Caribbean. While the CESI was started in 2014, the first Caribbean Energy Security Summit wasn’t held until 2015. Since then, the Clean Energy Finance Facility for the Caribbean and Central America was established to offer the region a variety of new funding mechanisms for renewable energy projects.

The Upcoming Energy Revolution

Despite a history that has been defined by impacts from the fossil fuel industry, Caribbean nations have recently started to embrace efforts to shift to more renewable forms of energy. Global energy experts and economists believe that the Caribbean region is on the cusp of a profound energy transformation. The desire to lower utility costs and support environmental sustainability has become a chief priority for Caribbean nations. To accomplish these goals, leaders hope to reduce the overall dependence on fossil fuels. In this region, affordable and reliable supplies of energy are vital for sustainable economic development.

Regional leaders are starting to come to the conclusion that investments in alternatives to fossil fuels would achieve favorable macroeconomic conditions for many Caribbean nations. Reducing energy costs could help the Caribbean improve economic growth and development while also enhancing the sustainability of the region as whole. Even with some of the world’s highest electric utility prices as a deterrent, Caribbean energy consumption has continued to grow in recent years. The historic dependence on imported fossil fuels has heavily exposed Caribbean nations to adverse oil market developments, trade shocks, and fiscal instability. However, improvements in energy efficiency, as well as investments in alternative forms of energy are expected to have a positive long-term impact on GDP throughout the Caribbean.

Sources

Balza, L., et al. (2016). “Lights On? Energy Needs in Latin America and the Caribbean to 2040.” Inter-American Development Bank.

Bond, D. (2017). “Oil in the Caribbean: Refineries, Mangroves, and the Negative Ecologies of Crude Oil.” Bennington College.

Costanza, R., et al. (1997). “The Value of the World’s Ecosystem Services and Natural Capital.” Nature 387: 253–60.

Gorman, H. (2001). “Refining Efficiency: Pollution Concerns, Regulatory Mechanisms, and Technological Change in the U.S. Petroleum Industry.” Athens: University of Ohio Press.

Gustafson, B. (2017). “The New Energy Imperialism in the Caribbean.” North American Congress on Latin America.

McIntyre, A., et al. (2016). “Caribbean Energy: Macro-Related Challenges.” International Monetary Fund.

Pantojas-Garcia, E. (1990). “Development Strategies as Ideology: Puerto Rico’ s Export-Led Industrialization Experience.” Boulder: Lynne Rienner Publishers.

Popke, J., and Harrison, C. (2018). “Geographies of renewable energy transition in the Caribbean: Reshaping the island energy metabolism.” Energy Research & Social Science: 36, 165 – 174.

Richardson, B. (1992). “The Caribbean in the Wider World, 1492–1992: A Regional Geography.” Cambridge: Cambridge University Press.