Global oil crisis exposes Cayman’s fuel supply vulnerability

Cayman’s reliance on imported fuel from the United States for everything from transport and electricity to the supply of fresh water is a national security risk, industry and security experts have warned.

US President Donald Trump had floated the prospect of a ban on diesel exports, in response to soaring pump prices driven by conflict in Iran.

His administration has since walked back from that threat after the G7 group of major world economies agreed to a joint release of 100 million barrels of oil and diesel from their strategic reserves.

But while the immediate threat may have receded, the stand-off has highlighted how tenuous Cayman’s energy supply chain looks amid an escalating global oil crisis.

Asked about a possible US export ban, Sonji Myles, CEO of Cayman’s energy regulator OfReg, said it would be “premature to give assurances about the availability or cost” of alternatives to supplies from the US Gulf Coast, where Cayman sources the bulk of its diesel and gasoline.

The Caribbean Utilities Company says it is monitoring the global situation, and plans for a wide range of scenarios. It considers a complete interruption of diesel supply “highly unlikely,” but says it maintains “business continuity and emergency response plans” to address fuel-supply challenges.

At the same time, renewable energy advocates argue that Cayman’s failure over the last two decades to make any meaningful progress in diversifying its energy supply has left the Islands dangerously exposed to price and security shocks.

James Whittaker, president of the Cayman Renewable Energy Association and owner of solar energy solutions provider GreenTech Solar, said successive governments have not advanced the energy transition fast enough. Despite the aggressive targets of a National Energy Plan, which aims for the island to be generating 70% of its power from renewables by 2037 and 100% by 2045, the island remains at less than 3%.

“We have not prioritised it, there has been insufficient urgency and we are paying for that now,” said Whittaker.

Anthony Clayton, who authored Jamaica’s National Security Plan and is now professor of Caribbean Sustainable Development at the University of West Indies, said the region as a whole had been slow to adopt renewable energy, treating it primarily as an environmental issue, rather than a national security concern.

“One of the problems that we quite often have in this region is that people simply don’t engage on an issue until it is a crisis,” he said.

How reliant is Cayman on US fuel?

The vulnerability of Cayman’s reliance on a single energy source is set out in the Islands’ National Energy Policy.

In an introduction to that document, Neyka Webster, acting chief officer in the Ministry of Sustainability, wrote, “Our continued reliance on fossil fuels poses significant risks to our nation’s energy security, cost of living, and environmental health.”

The report indicates only 3% of Cayman’s energy comes from renewables, with the bulk of the Islands’ electricity reliant on diesel-powered generators.

A separate analysis from OfReg indicates that almost all of that diesel fuel, as well as the gasoline sold at gas stations around the Islands, comes from the US Gulf coast.

Cayman doesn’t have the market power to negotiate and is a “price taker” in international fuel markets, the report warns.

“Any restriction on US fuel exports could have a significant impact on Cayman, given our reliance on supplies from the US Gulf Coast, with potential implications across the wider Caribbean,” Myles told the Compass last month.

“We are considering appropriate contingencies,” he said, “but securing alternative supplies presents challenges, particularly for a small market such as Cayman.”

US ban would be ‘catastrophic’

Dow Travers, CEO of Refuel gas stations and mobile supply business, said it would be “catastrophic” for prices in Cayman if the US banned diesel exports.

He said the US is the largest exporter of fuel, and Cayman, as small isolated islands, would likely be near the back of the line when it came to finding alternate options.

The UK, for example, obtains 30% of its diesel imports from the US, and would also have to find alternative sources.

Given the situation in Russia and Iran, that would mean almost all of the world’s main producers of refined oil products were closed off to Cayman.

Travers does not rule out the possibility of the Trump administration following through on its statements, although he said this policy had “thankfully been walked back,” with the use of lower-tax diesel on the roads the current preferred route of the US government.

CREA’s Whittaker believes Trump’s record has demonstrated his threats, however unprecedented, should be taken seriously.

“We’re just one Trump administration decision away from a major spike,” he said.

“There is a risk that you couldn’t get diesel at all, which would be catastrophic. I think the more probable risk is that you’d have to pay an extremely high price for it.”

Clayton said every government in the region was starting to come to terms with the fact that the US was a less reliable partner than it had been in the past.

“People will look to alternatives, and it’s not just about cost. It’s about risk,” he said. “You can perhaps accept a spike in costs. What you can’t accept is the risk that your supplier is going to put in, for example, an export embargo, and your shipment doesn’t turn up.”

What happens if the shipments stop?

What would happen if diesel shipments stopped altogether is a question the main parties have not answered in detail.

CUC, which generates Grand Cayman’s electricity from diesel, said in response to questions from the Compass, “Maintaining reliable electricity service is CUC’s highest priority, and the company maintains comprehensive business continuity and emergency response plans to address a wide range of potential disruptions, including fuel supply challenges.”

Asked whether it had a secure alternative source if the US restricted exports, CUC said it could not comment on “specific contractual arrangements or procurement strategies.” It did not say how much fuel it holds on island or how long that supply would last.

“No supply arrangement can entirely eliminate the potential impacts of significant geopolitical or market disruptions,” the company acknowledged.

Neither Sol nor Rubis responded to requests for comment or to be interviewed as part of this article.

The Governor’s Office said energy security was “a core national security issue,” but that responsibility for fuel supply, energy planning and contingency arrangements “rests with the Cayman Islands Government.” It said the UK maintains regular engagement with all its territories on resilience matters.

The stakes extend beyond the cost of filling a car’s tank. The National Energy Policy notes that Cayman’s potable water is “primarily derived from reverse-osmosis desalination,” a process powered by electricity from the same diesel-fired grid.

“Your water system is built on top of your energy system,” Clayton said. “So, if your energy system goes down, your water system goes down too, and that means that you are really only a few days away from an absolute crisis if you get a major interruption to your energy supplies.”

Duty relief has budget implications

Government has not addressed the supply issue directly.

In a press release confirming the continuation of duty relief through the end of December, Premier André Ebanks and Finance Minister Rolston Anglin recognised the longer-term need to shift Cayman away from dependence on fossil fuels.

Ebanks said, “Although Government is unable to control global fuel prices, we can act responsibly to reduce their impact on electricity, transportation and household budgets. We are also continuing the longer-term work on energy efficiency and renewable generation so that Cayman is less exposed to future price shocks.”

Anglin added that government has already spent $11.35 million in electricity rebates and foregone revenue from the duty concession.

“That is a significant level of support, but it reflects the scale of the exposure facing a small island economy that imports the fuel used to generate electricity and move people and goods,” he said.

Prentice Panton, owner of the On the Run gas station in George Town, said the wider price impact of the global supply shortage was not something the Islands’ government could solve in the short term.

“I see in the coming months this is only getting worse,” he said. “This is beyond our control, beyond our government’s control.”

Decades behind

Clayton said crises had helped accelerate solar-energy adoption in Jamaica and the Bahamas. But he cautioned that it can take decades to transform a country’s energy supply, and Caribbean islands had been slow to adapt, despite having an obvious advantage in year-round sunshine.

“Jamaica’s moved ahead,” he said. “One or two other islands are starting to move in a more sustained way to develop these alternatives, but we still have a very far way to go. I wish we’d started several decades ago, but we didn’t. So we can only go from where we are now.”

He said renewable energy had developed to the point where it had been price competitive with fossil fuels for several years.

“Why on Earth do we have to wait until we get another crisis before we start to think maybe we could do something about permanently structurally reducing our dependence on imported hydrocarbons?” Clayton asked.

Whittaker takes the same view. He said it was understandable that the current government had moved to insulate consumers from the costs of the current crisis. But, he said, it was effectively putting a “Band-Aid on an amputated leg.”

He cited the millions of dollars being spent now on fossil-fuel subsidy as money that should have been spent much earlier on diversifying Cayman’s energy supply.

“The best time to have done renewable energy was a decade ago, and the next best time is right now,” he said.

But Cayman remains significantly behind its targets. A 23 MW solar farm is currently at the request-for-proposals stage. But that process has been in motion since 2020 and the finished project, currently years away, would still be a drop in the bucket against the scale of new capacity needed to meet the National Energy Policy’s targets.

Whittaker is calling on government to move swiftly to add hundreds of megawatts of solar, both from rooftop installations and from large solar farms.

“I don’t think we can blame the current government for the current subsidies,” he said, “but they are responsible for taking immediate action now for the medium and the long term.”

CUC said it was evaluating options to support fuel diversity and energy security, including utility-scale solar, battery storage and liquefied natural gas. It said these “have the potential to reduce exposure to fuel price volatility and enhance the overall resilience of the electricity system.”

But it added that their implementation “remains subject to regulatory approvals, commercial considerations, and ongoing evaluation of customer benefits.”

Opportunity in crisis

Crisis has been the mother of invention for some economies. Cuba has responded to a fuels embargo with a swift investment in solar, while the coastal town of Black River in Jamaica turned to solar-powered micro-grids after last year’s Hurricane Melissa.

For Clayton, the danger is that the urgency fades once the immediate threat recedes.

“All of a sudden, people go, ‘Oh my God, we are completely dependent on fossil hydrocarbons,'” he said. “Yeah, but we were yesterday as well.”

Cayman Compass journalist James Whittaker, author of this article, and James Whittaker, president of the Cayman Renewable Energy Association, are not related.