Prolonged T&T oil strike could lead to steep devaluation – economist

(Trinidad Guardian) A warning has been sounded that should Petrotrin workers go on strike for a prolonged period of time it could lead to a devaluation of the Trinidad and Tobago dollar against other major currencies with it hitting TT $9 to US $1.

That is the prediction from economist Dr Roger Hosein who pointed out that with the TT dollar already under pressure and with a fall in the price of the country’s major export commodities and production of both crude oil and natural gas curtailed, there are already foreign exchange shortages. In an emailed response to Sunday Guardian questions, Hosein said: “A strike would precipitate a fall in export of refined petroleum products and serve the economy a further foreign exchange blow, at a time when it is perhaps most unwanted. It is likely the value of our currency would have to take a hit with conversion ratio of TT$9 to US$1 becoming a real possibility.”

He added, “We are very well aware of the decreasing foreign exchange earnings of the Trinidad and Tobago economy associated with declining price and production of its main export good. In 2011 Trinidad and Tobago exported 41.2mn barrels of petroleum products but by 2015 this declined to 34.2mn barrels.”

Already strike action in the energy sector has had a negative effect on the country’s foreign exchange situation. In October, the Oilfields Workers Trade Union started strike action against a company called Island Offshore Contractors Limited. That is the company that provided most of the boats to transport workers from Trinmar’s Point Fortin base to its offshore operations. In addition the company provides emergency support and other services to Petrotrin to keep its Trinmar operations going.

The OWTU initiated strike action to force IOCL to pay wages similar to those of Petrotrin workers and in the process has led to IOCL unable to provide transportation services to Petrotrin.

In a letter to the Minister of Energy, Petrotrin’s President Fitzroy Harewood noted that this has had the effect of disrupting production to the extent that Trinmar’s production has fallen by over 2,000 barrels of oil per day (bopd). This is oil that the company now has to use foreign exchange to buy. If the 2,000 bopd is multiplied by the average price of crude for December using WTI prices at US 52.67 a barrel, Petrotrin would have had to spend US $3.157 million that would had ordinarily stayed in T&T. Put another way, if the average person traveling requires US $1,000 then that could have allowed 3,175 people to get the foreign exchange from the banks in December with no hassle.

Dr Hosein noted that the strike action would in particular harm the economies of towns that depend on Petrotrin’s activities for their sustenance. He pointed to ordinary people who the University of the West Indies lecturer said would be negatively impacted.

“Strike action by state-owned Petrotrin would compromise spill over economic activity in these communities with adverse consequences for the souse man, the pudding man, the gyro man and the little lady hustling geera pork. Collectively, this would affect the amount of value added tax revenues collected which in 2015/2016 was already approximately 50 per cent short of what was forecast,” Hosein told the Sunday Guardian.

The OWTU has initiated strike action over the failure of its members to get a pay raise for the last six years. The Union has accused the company and the former UNC government of victimisation. However a blog on the website of the Energy Chamber compares salaries at Petrotrin with the rest of the energy sector and the state owned company’s workers appear to be doing relatively well. For example, a truck driver earns $17,000 a month at Petrotrin while in the industry the driver earns $8,000. A fabricator gets $20,000 a month at Petrotrin and in the energy sector the average salary for a similar position is $11,000.

In light of this Dr Hosein has warned that any increase in salary must be carefully thought through. He cited as an example the decision by the last government to settle just before the last general elections with public servants at a 14 per cent increase which has now ballooned the government’s wage bill.

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