ANALYSTS expect world oil prices to continue their upward movement throughout 2010 and hit at least US$90 a barrel by year-end, resulting in an increase in Jamaica’s oil bill which is expected to be just under US$2 billion this financial year.

Oil prices ended 2009 at near US$80 a barrel last Thursday and by yesterday rose to US$82 a barrel. And the feeling is that prices will move to the north as investors see signs of global economic recovery and increased manufacturing activity from industrialised nations, such as China, which is expected to grow by 9.5 per cent this year.

“The new spurt in oil prices is predicated on the fact that we have had a recovery in a number of economies, we have seen an increase in manufacturing activities worldwide, which is what is also causing an increase in commodity prices, whether it’s copper, aluminium or steel,” explained Dr Raymond Wright, consultant and former group managing director of the Petroleum Corporation of Jamaica (PCJ).

This view is corroborated by the International Energy Agency, which said last month that world oil demand will grow more than expected in 2010 mainly due to accelerating economic activity in China.

Wright, although noting that there will be some volatility which might cause the price of oil to fluctuate, said that the fundamentals suggest oil prices are likely to rise gradually this year.

“US$90 a barrell will be a benchmark, at least, in 10 or 11 months’ time,” he said, adding that it could be higher if there are any geo-political factors.

Financial analyst Dennis Chung told the Business Observer after Observer’s weekly Monday Exchange meeting that oil prices could go as far as US$100 by year-end, which paints a gloomy picture for Jamaica’s current account. The current account deficit for the period January to August 2009 was US$1,647.3 million, or 80 per cent lower than the comparative period last year, boosted by lower oil prices — as low as US$40 a barrel — for the most part of that period, and reduced imports.

“Do you know what this means for our balance of payments?” he asked rhetorically.

Economist Dr Davidson Daway, after the Monday Exchange meeting, also said he expects “a steady incline in oil prices over the next eight months”, adding that this will impact negatively on the country’s oil import bill, which according to Dr Wright, will be just under US$2 billion at the end of March.

“I can see us paying a whole lot for oil,” said Daway.

Wright said that, at the same time, the country was being spared the brunt of the impact of oil price increases on the world market due to the PetroCaribe agreement which the Government entered into with Venezuela in 2005.

“Jamaica has been saved a lot of misery by the PetroCaribe initiative because we are paying significantly less for oil from Venezuela than is the world market price,” Wright said.