The recent spike in oil prices due to the ongoing conflict in the Middle East may not benefit TT due to this country’s reduced oil and gas production according to former energy minister Kevin Ramnarine.
Oil prices witnessed a spike on Monday following drone strikes on a Saudi oil facility said to be one of the largest in the world, over the weekend that shut off more than half of the kingdom’s daily exports, or about five per cent of the world’s crude production.
According to Bloomberg, Brent crude surged 14 per cent during the day to settle at US $69.22 per barrel while West Texas Intermediate crude was trading at US $62.93.
In a post to his Facebook page on Monday, Ramnarine said the increased prices were due to a cut in production as the drone attacks had reduced the kingdom’s production by 5.7 million barrels per day of oil.
He said while those oil companies that operated in TT would earn more money and pay more taxes, that would be offset by local crude oil production which was “the lowest since the 1950.”
Ramnarine said while TT exported around 59,000 barrels of oil per day, the country also imported refined fuels (gasoline, diesel etc) at world market prices.
“As the oil price increases the price of gasoline, diesel and jet fuel increase. We import around 25,000 barrels per day of fuels at a much higher price than crude oil. So we have to find more money (US dollars) to import fuel.”
He said as oil prices increase, the subsidy on fuel (super gasoline and diesel) would also increase. He added that while the subsidy on super was relatively small, the subsidy on diesel was “still significant.
“No matter how you look at the problems of the economy, it dovetails back to falling oil and natural gas production. We have to increase both in the short to medium term while we work on our diversification projects.”