Global oil shock hits Pacific economies
The global oil shock triggered by this year’s Middle East conflict drove Pacific diesel prices up by around 35%.
“A disruption to global oil supplies quickly becomes more expensive electricity, transport and food in the Pacific,” said Dr Morgan.
“In some cases, it also becomes a question of whether countries have enough fuel to keep essential services operating.”
In Fiji alone, the annual cost of imported refined fuels could rise by around $US375 million if elevated oil prices persist – more than the country’s annual healthcare budget.
Vanuatu could face an increase of more than $US68 million, equivalent to around 5% of GDP.
The Marshall Islands and Tuvalu have each introduced emergency measures over fuel supplies this year, while several other Pacific governments have taken steps to respond to the crisis.
Renewables could halve electricity costs
Pacific households already pay some of the highest electricity prices in the world. The average cost across the region is around $US0.47 per kilowatt-hour – almost three times the global average.
“It’s not just about reducing emissions,” Dr Morgan says.
“There is a very strong economic and energy-security case for renewables.
“The Pacific has abundant renewable resources – particularly solar – and the technology needed to make this transition already exists.”
The report estimates the region needs around 2.2 gigawatts of new renewable generation and 8800 megawatt-hours of battery storage to replace diesel power generation.
But attracting investment remains a challenge. Small project sizes, high transport and construction costs and perceptions of investment risk can make Pacific projects less attractive.
Around $US650 million a year in international finance is needed to meet the Pacific’s renewable-energy targets. In 2024, the region received about $US216 million – roughly one-third of what was needed.
