Guyana, the unexpected big winner of the oil shock

The oil price surge triggered by the war between the United States, Israel, and Iran is further strengthening Guyana's position as home to the world's fastest-growing economy, thanks to its massive offshore reserves. But beneath this spectacular prosperity lies a major challenge: translating oil revenues into sustainable development for its entire population.

Even before the military escalation in the Middle East, Guyana was undergoing an unprecedented economic transformation. This small Caribbean state—a former British colony with fewer than one million inhabitants—was long considered one of the poorest in South America. Yet within just a few years, Georgetown has emerged as one of the world's new oil giants.

The war between the United States, Israel, and Iran, which has severely disrupted international energy markets, has only heightened the strategic importance of this small nation. With estimated reserves of 11 billion barrels and direct access to the Atlantic Ocean—far from sensitive maritime chokepoints such as the Strait of Hormuz—Guyana now stands out as a stable supplier in a world hungry for energy security. However, this new windfall is fueling a growing debate about how the billions of dollars in oil revenues should be invested to avoid the mistakes made by other hydrocarbon-dependent nations.

Oil Boom

The development of Guyana's oil sector is one of the fastest success stories in the industry's recent history. Led by a consortium headed by ExxonMobil, it has pushed production to more than 900,000 barrels per day in just seven years—a milestone that offshore projects typically take far longer to reach.

The economic impact has been dramatic. Since commercial production began in 2019, the country's GDP has more than quadrupled, reaching nearly $27.5 billion in 2024. In the capital, Georgetown, the signs of this newfound wealth are everywhere: modern office buildings, upscale hotels, new residential neighborhoods, and a proliferation of oil industry-related services.

The rise in crude prices driven by the Middle East conflict could accelerate this momentum even further. According to several estimates, if prices hold around $100 per barrel through the end of the year, Guyana's oil revenues could surge by nearly 70% compared to the previous year.

The country is also poised to benefit from a substantial increase in its share of oil revenues. Until now, a large portion of production went back to the consortium to recover its exploration and development costs. But those investments could be fully recouped as early as this year, which would allow the Guyanese state to claim a much larger share of the profits generated by the oil fields.

Heading Toward Dutch Disease?

Yet this meteoric prosperity comes with well-known risks. The example of neighboring Venezuela serves as a cautionary tale about the dangers of excessive dependence on oil revenues and exposure to boom-and-bust crude price cycles—symptoms of the economic phenomenon known as "Dutch disease." To guard against this, Guyana established a sovereign wealth fund in 2019 designed to receive all oil revenues and gradually channel them into development projects. It is worth noting, however, that Guyana holds two advantages over its Venezuelan neighbor: brand-new infrastructure, as well as a much lighter grade of crude compared to Venezuela's extra-heavy oil.

The government is also stressing the need to diversify the economy and ensure that more of the population benefits from the fruits of this growth. Despite impressive GDP figures, oil, gas, and related activities now account for more than three-quarters of the national economy. Some areas of infrastructure still lag significantly behind, with recurring power outages, inadequate sanitation networks, and a rising cost of living.

To address these concerns, the authorities are gradually tightening local content rules. Oil companies are required to use Guyanese suppliers in several sectors, including catering, transportation, and medical services. Local entrepreneurs hope that broadening these requirements will drive the creation of skilled jobs and foster a more diversified business ecosystem.

But criticism remains. Some business leaders point to practices that allow foreign groups to indirectly benefit from quotas reserved for local players. Others note that inflation driven by the oil boom is eating into some of the expected gains for households and small businesses. The paradox is particularly striking in the energy sector: although Guyana has become a net oil exporter, it still imports refined fuels and is therefore exposed to rising prices at the pump.

For President Irfaan Ali, the challenge now lies in managing the expectations of a population that is confronted daily with headlines about extraordinary wealth. For while oil is profoundly transforming the country, the true measure of success will rest on Guyana's ability to convert this historic windfall into lasting improvements in living standards — in a country long plagued by corruption and communal divisions, primarily between Indo-Guyanese and Afro-Guyanese communities. Even if geopolitical tensions ease and crude prices fall back, the country already appears to have secured a new standing on the global energy map. The question that remains is whether this prosperity can benefit all citizens and outlast the inevitable end of the oil cycle.