Brent Above $106, and the Caribbean Pays at the Meter

A war in its eighth month has pushed oil roughly 45% above its prewar level. For a region that imports its fuel and burns much of it for power, the war is already on the electricity bill.

Brent crude topped 106 US dollars a barrel on October 12, climbing after a deadly attack on a Saudi airport, according to CNBC, with other trading desks quoting the benchmark between 106 and 109 dollars through the day. The war between the United States, Israel and Iran, now in its eighth month, has become what Reuters has called the biggest energy supply shock on record, and the International Monetary Fund estimates Brent is running roughly 45% above its prewar level. President Trump has pressed the Group of 7 to release 100 million barrels from emergency reserves to take some heat out of the market, Al Jazeera reported this week.

For the capitals that produce oil and gas, this is a complicated windfall. For nearly everyone else in the Caribbean, it is a straightforward tax. Most of the region imports almost all of its transport fuel and still generates a large share of its electricity from imported diesel and heavy fuel oil. When the barrel moves, the pass-through is fast and it is regressive. It shows up in the pump price, then in the power bill, then in the cost of the imported food that arrives by ship.

The meter reads the war

The clearest reading is in the places where the grid is already fragile. In Cuba, the national utility reported that more than 1,200 megawatts of generating capacity sat idle this month for lack of imported fuel, with the country having completed only one fuel import all year, a Russian government donation, according to Rio Times citing the energy ministry's Lazaro Guerra Hernandez. On October 10 a transmission line failure split the eastern grid from the rest of the island as the utility forecast an evening shortfall near 1,680 megawatts. Cuba's crisis has many authors, but a 45% rise in the cost of the fuel it cannot afford to buy is not helping.

Elsewhere the damage is quieter and measured in cents. In Sint Maarten, the regulator is examining why the utility GEBE's fuel charge reached about 49 cents per kilowatt-hour in the first half of the year, and has given the fuel supplier until October 15 to produce its documents, The Daily Herald reported. In the United States Virgin Islands, Governor Albert Bryan Jr. vetoed a bill that would have diverted fuel-tax revenue to credit hospitals' electricity costs, arguing, as the VI Consortium reported, that the credits would cover less than half of the hospitals' energy expenses and that one financial problem cannot be solved by creating another. These are the small, grinding consequences of a war fought an ocean away.

Two Caribbeans, one barrel

The barrel divides the region as neatly as any line on a map. Trinidad and Tobago rebuilt its 2027 budget this month around an oil assumption of 77 US dollars, up from 73.25, and a gas assumption of 5 US dollars per million British thermal units, lifting the revenue it expects from the energy sector. Guyana, now producing around 900,000 barrels a day and closing on a million, is riding the single largest terms-of-trade gain in its history. For Georgetown and Port of Spain, higher prices are a tailwind.

For Bridgetown, Kingston, Castries and most points between, the same price is a headwind that strikes tourism twice. Airlines price jet fuel into every fare, which raises the cost of getting a visitor to the region, and hotels price diesel into every air-conditioned room once the visitor arrives. The IMF's decision to trim regional growth this week leaned on exactly this mechanism. An energy shock does not need to reach the Caribbean by missile to do its damage. It arrives by invoice, and it is already here.

The tourism channel deserves its own line, because it is where the shock does double damage to the islands that depend on visitors. Higher crude feeds directly into jet fuel, which airlines pass into fares, so the war raises the price of getting a traveler to the Caribbean. It then raises the price of hosting that traveler once the diesel bill for an air-conditioned resort is paid. For destinations already warned this year about attracting the wrong kind of visitor, a fuel-driven increase in the cost of a holiday is the last thing a soft season needs, and it arrives at exactly the moment the region can least absorb it.

What the region can and cannot do

There is no regional lever that offsets a global price. The responses that exist are the slow ones. Barbados and the Eastern Caribbean have pushed hardest on solar and on reducing the diesel share of the grid, because every kilowatt-hour that does not come from an imported barrel is a kilowatt-hour insulated from Riyadh and Hormuz. The case for that transition was always environmental. The war has made it a balance-of-payments argument, and a national-security one. The cheapest energy in a shock is the energy a country does not have to import, and the Caribbean is relearning that lesson one power bill at a time.