(Trinidad Guardian) The Energy Chamber of T&T is calling on the country to “plan accordingly” as oil prices continue to tumble. He made the call on Wednesday as oil prices fell to a fresh six-year low. The latest decline was triggered by data which showed a surprise increase in US stockpiles, adding to a massive glut of crude around the globe. West Texas Intermediate (WTI), which trades slightly higher than the crudes produced locally, fell to US$40.80 a barrel in New York, their lowest close since March 2, 2009.
The current price is well below the US$45 a barrel price on which the national budget is pegged and has given rise to concerns about how the resulting sharp drop in revenue from oil will affect T&T’s economy. Finance Minister Larry Howai said Government has been monitoring the matter very closely. “The overall fiscal position has been better than expected for the first nine months of the financial year and we shall release that data over the next couple of days.
The better performance has come from lower levels of expenditure and better than expected gas prices. “The Ministry of Finance has worked several scenarios and considered as many options for addressing this matter of falling oil prices. “As you would be aware the Ministry does not adjust policy on the basis of daily price movements but in the context of longer term expectations for prices but it goes without saying that further adjustments will have to be made if prices fall below US$40 for an extended period,” he said.
“At the moment, the Futures market reflects a potential recovery in the coming months to about US$50. We are not sanguine about this and have been using much more conservative numbers in preparing next year’s national budget. You can be assured that this matter will be the subject of continuing very close attention by the ministry in the coming months.”
In a statement yesterday, the Energy Chamber described the falling energy prices as a source of concern: “The fall in oil prices is obviously a major concern for the industry, and should be a major concern for all of the citizens of Trinidad and Tobago. “The oil and gas industry is the driving force of our economy and represents the major source of Government revenue and of foreign currency.
While we cannot predict future prices, as a country we need to be very aware of the risk that prices will remain low in the medium- term and we must plan accordingly.” Also commenting on the latest price drop was University of the West Indies (UWI) economist Dr Roger Hosein told the T&T Guardian there was need for caution by political leaders and careful management.
“Policy makers will need to carefully decide on expenditure cutting strategies and avenues to increase revenue flows in the non oil sector. The economy is in a new normal and there is now a heightened need for wiser economic decision making,” he said. Businessman Abrahim Ali, a former President of the San Juan Business Association, said the country should have been worried about the falling oil prices a long time ago.
“Some people have been saying that we are now a gas based economy but gas prices have also been low. I do not think that the current energy prices could sustain the recurrent expenditure of the country,” he said. Ali said past and present governments have created a “welfare state” where people expect free handouts. In times of low energy prices this is not sustainable. “Whoever forms the next government, they have a lot of work to do. We may even see increased taxes to make up for the shortfalls in revenues,” he said.
