THERE IS AMONG US a constituency that places rising food prices squarely at the foot of maladministration. There are those, too, who harbour the view – and, indeed, go to great lengths to orchestrate such – that under a different administration, prices
would fall and bring much relief for those in desperate straits as well as the better off in society.

There is a familiar saying: A man convinced against his will, is of the same opinion still; therefore, in these circumstances it becomes more prudent to share the experiences of others rather than attempt to pour cold water on an intransigent conviction.

Effect on global economy

Following this grandmothers' principle, one is indeed mindful to make particular reference to an article that recently found its way onto the premier pages of the highly influential publication Financial World. Here David Kern, a former group chief economist with NatWest and current adviser to the British Chamber of Commerce, formed the opinion that the current surge in oil prices is causing anxiety over the health of the global economy.

In examining the causes and assessing the prospects for world economies in the wake of recent oil hikes, now inching to US$100 per barrel, Kern posits that judging by the damaging effects of earlier oil crises, it is not surprising that present increases are causing acute concern over the implications for the world economy.

Will there be any respite from this surge in oil prices? Kern's view is that over the past few years, oil prices have been affected by the Iranian nuclear issue, by terrorist threats particularly in Saudi Arabia, and by conflicts in the Middle East. He further draws the conclusion that these geo-political tensions are likely to persist and, as a result, oil prices will become more volatile and rise higher than they would otherwise.

The message that Kerns is conveying to us is that high oil prices will inevitably affect growth and increase inflation, factors that are likely to cause serious damage to the world economy.

Where Barbados stands

Although it is an island, Barbados cannot deem itself isolated from the world economy. Unlike Asia and China where increase in oil prices will have little effect because of their massive export base, Barbados carries a high demand on imports especially in terms of food. This translates into the reality that soaring oil prices are bound to have a negative impact on external manufacturing and transport costs, which ultimately will have a residual effect on supermarket prices.

How any government tackles these rising costs in bringing relief to the less well-off in society calls for careful consideration. One must be mindful that there is no supermarket item marked "for the poor" or, for that matter, "for the better off". Consequently any government-sponsored reduction in supermarket prices will be of more benefit to the better-off, who have greater spending power, than to the poor and destitute.

Another reflection for any government is retention of labour. It is well known that when profit margins begin to fall, the first casualties are staff; in most cases, the lower paid members of staff. For any right-thinking government, any increase in unemployment is hardly desirable and therefore there must be a balance between profit margins, staff retention and providing assistance to the poor.

If our Government wishes to address the needs of the poor directly, it may reach a stage where special food vouchers are handed to those most in need. Yes, one can hear the public outcry and condemnation, particularly from the better-off, that poor people must not be relegated to hand-outs. However, any mass reduction in supermarket prices will benefit the poor in Silver Sands as well as the wealthy in Sandy Lane – and do not for a moment claim that their food choices are vastly different.

Any policy to assist the poor must be directed where the need is greatest; it makes little sense to impose restrictions on supermarket price levels and increase unemployment.

It is a matter of record that a barrel of oil on January 7, 1994, was US$12.37 and that the level of unemployment then stood at 20 per cent; today, with a barrel of oil approaching US$100, the level of unemployment stands at eight per cent. We must therefore be mindful, in any policy determination, not to throw away the baby with the bath water.

Alternatives to oil

Faced with the virtual threat of rising oil prices, almost every country is ferreting out alternative sources of energy. One recalls that in his State of the Union message on January 23, 2007, President Bush made a commitment to the American people that he would reduce petroleum dependency by 20 per cent within ten years by making American cars run more efficiently on home-grown maize and palm oil.

Such a proposal opens up opportunities for engineers and other technicians to formulate new technology strategies to meet the change in environment, but it also sends a signal that a country must ready itself for self-sustainability.

In Barbados, tax incentives on solar water heaters is a step in the right direction. In addition, the decision by the Ministry of Agriculture to cultivate and encourage a special cane variety to produce ethanol may not appear economically viable at the outset, but it demonstrates that Barbados understands the realities and national benefits of energy conservation.

It therefore makes good sense to provide farmers with a tax incentive to prepare cultivation of the special cane breed to increase cane yields for ethanol production. Government should also encourage solar entities, through tax incentives or otherwise, to build a smaller unit that can be better accommodated to suit the size of the more modest homes.

The ultimate goal is for almost every dwelling house to have a solar heating system and therefore conserve energy while providing some relief, lest these soaring oil prices continue to have us over a barrel.