The Minister of Finance in his mid-term review of the 2015-16 budget, raised the prices of super gasoline and diesel by 15 per cent in an attempt to bring them into line with the current international prices.
The intention is to allow the prices of oil-based fuels in this country to fluctuate in tandem with the international prices; ie there should be no “subsidy”—defined as the difference between local (the lower) and international prices. One reason for doing this is that Petrotrin is said to be supplying the local market with fuels refined from crude oil imported at international prices. However, a paper delivered at the T&T Energy Conference 2015, Operating in a Low Oil Price Environment by Colin Ramesar, stated that the Petrotrin’s refinery has a throughput capacity of 168,000bbls/dy of crude oil and was operating at 111,537,55 per cent of which was imported and the rest from its own local production.
The paper reported that Petrotrin sells 25 per cent of its total refined products on the local market and exports the rest—regionally (17 per cent), extra regionally (15 per cent), internationally (40 per cent) with bunkers (three per cent). Hence it would appear that the local crude oil production of Petrotrin (all of which is used in the refinery) is more than sufficient to supply the market with oil-based fuels.
The intention behind tying the local prices of fuels to those in the international market suggests that the population in T&T should pay the same prices as a country that has no oil and imports its fuels; ie the general public should not benefit from our God-given patrimony in the pricing of fuels. Yet Government is extracting from the energy sector producers royalties (an entitlement of the owner of the resource -us- to a part of the total production), in part government share of crude oil produced or taken as part of profits in production sharing contracts and petroleum levy, all of which are compensations to the State, to us, for the commercial depletion and export of this patrimony.
The economic prices at which the population should buy fuels should be an assessed cost to Petrotrin, including associated profit, to produce, refine the crude oil and get the products distributed locally. These economic prices at all time will be below the international prices, more so would be fairly static and not vary in the short- to medium-term with fluctuations in the international prices. Since Petrotrin as a producer pays royalties on all its production it expects to be paid international prices for its products sold locally. Hence the prices to Petrotrin should be made up of the economic prices paid directly by the population and the balance by the Government in lieu of royalties etc it has collected. This is not a subsidy by government.
Separate and apart from the above argument is the concern that the prices in the local market have led to poor consumption habits which are of no benefit to the economy. The problem appears to be congestion on the roads because of too many cars (new and foreign used), poor public transportation and road systems—supported by the Government’s intention to build more roads and reduction in maxi taxis’ taxes. Also the removal of taxes on electric and hybrid cars and the imposition of more taxes on cars with larger engines, seem to suggest a desire to reduce the local use of fossil fuels—our carbon footprint? What one can query is whether the direct cause of the transportation problem is “cheap fuel” or rather is it cheap cars and poor transportation and road systems? If it is still deemed necessary to tax fuels in T&T to reduce their consumption or even raise funds for government spending then tying these prices to the varying international prices makes little economic sense. Also we have the additional burden on the ministry to monitor the international prices and continually inform the distributors of the prices as they change internationally.
Mary K King
St Augustine