Panel Says Oil Woes of the Americas Demand US Aid

     WASHINGTON (CN) – House Foreign Affairs committee members met Thursday to discuss how the U.S. can help struggling countries in the Americas recover from the havoc wrought by cheap oil.
     While prices have begun to rise, the consequences of the recent oil price crash have significantly impacted the Americas, with economic, political and social consequences that have caused the region’s economy to contract for the first time since 2009, Chairman Rep. Jeff Duncan, R-S.C., said in opening remarks before the House Foreign Affairs Subcommittee on the Western Hemisphere.
     The oil crash hit Venezuela the hardest, Duncan said. Though it houses the world’s largest oil reserves, it is now gripped by a humanitarian crisis magnified by corruption and the governments’ gross mismanagement of the economic downturn, he said.
     Electricity and water rationing, and medicine and equipment shortages in the country’s hospitals have become the norm, while 90 percent of Venezuelan households are experiencing food shortages, Duncan said.
     “I’m deeply worried about the Venezuelan people, the sustainability of Venezuela’s current trajectory, and the regional instability likely to result from any potential collapse of the country,” Duncan said.
     He also expressed concern about the country’s PetroCaribe program, which allows Caribbean states to buy oil at market value upfront, and pay the remainder through financing agreements lasting 17 to 25 years.
     Jamaica and the Dominican Republic have repaid their debts, but other Caribbean countries remain indebted to the program and dependant on it for energy, he added.
     Duncan said the program is in trouble and its member countries do not have integrated energy markets capable of attracting investors. They need greater U.S. engagement, including energy assistance in the form of pipelines and liquid natural gas infrastructure, he added.
     Central American countries dependent on oil imports and hydropower also need American intervention, a reality that beckons the U.S. to implement a disaster prevention response to help boost their access to liquid natural gas, he said.
     While Venezuela has reeled from the oil crash, other countries with diversified energy sources and economies, in addition to investor-friendly markets, have better chances of weathering the economic storm, Amos Hochstein with the State Department’s Bureau of Energy Resources told the subcommittee.
     Hochstein noted that Argentina, which houses the world’s second-largest shale gas reserve, has been stymied by a restrictive regulatory and policy environment, but is now open to reform. Colombia has had difficulty drawing necessary investors after production dropped off when oil prices fell, but the U.S. is working with the country to develop stronger regulatory and policy frameworks, he said.
     And while Mexico implemented economic-stimulating reforms to the structure of its energy sectors, it continues to struggle in the crash’s wake. Still, the reforms probably helped buffer the impact of the crash, Hochstein said in his testimony. Mexico also has a large manufacturing sector that benefits from low energy prices, and a diverse economy that helped cushion the blow, said Melanie Kenderdine with the Energy Department.
     Countries in the Americas also need to diversify the energy they consume, Hochstein said, mixing in renewable energy and natural gas with oil. Hochstein also raised concerns about the PetroCaribe program, noting that Venezuela uses it as a political and financial lever against its neighbors to create dependency.
     “The Caribbean has excellent resources in solar, wind, geothermal energy, and biomass, and some islands have the size and scale needed for natural gas imports. Developing these capabilities means those countries will be less reliant on one energy supplier, will spend less on inefficient energy, and will benefit from proximity to the U.S. market and innovations,” he said.
     Hochstein noted that Jamaica has drawn U.S. companies to its waters with floating natural gas barges that convert the gas to liquid. The barges could also be used in Central and South America, he said, while gas pipelines are interconnected.
     Hochstein said that he views a gas pipeline connecting the U.S. to Mexico and Guatemala as a necessity that will broaden the U.S. energy market.

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