Although there is a decline in revenue from the country’s largest income sector – oil and gas – Finance Minister Colm Imbert on Wednesday did not address the issue of fuel liberalisation.
As he presented the mid-year review in Parliament, Imbert said the weighted average price for local crude oil from October 2020 to April 2021 was US$52.76, which was above the budgeted figure of US$45.
He added that the average production for the period October 2020 to May 2021, was 57,089 barrels per day, which was below what was used in the October budget and oil production was also below what was budgeted in October.
“Natural gas prices are below the forecast, oil prices are above the forecast, whereas oil production is a bit below. Since we get two-thirds or more of our revenue from natural gas and one-third or less from oil, the lower production and prices of natural gas has affected us significantly.
“There has been a significant reduction in revenue from the natural gas sector.”
Previous budget deficits had promoted government’s decision to move towards liberalisation of the liquid petroleum fuel market. Imbert explained in October’s budget presentation that government was unable to bear the hefty burden of gas subsidies which amounted to almost $25 billion between 2006 and 2020.
But, on Wednesday plans for the initiative were not mentioned.
At the time of Imbert’s announcement in October 2020 global oil prices were US$39.22 and US$41.29 per barrel for WTI Crude and Brent Crude, respectively. On Wednesday, the prices were US$70.05 and US$72.22.
With the reeling effects of the covid19 pandemic from 2020 into 2021, that has shattered economies and livelihoods around the world, former energy minister Kevin Ramnarine has called on government to defer its plans on fuel liberalisation until the economy recovers from the blows of the covid19 pandemic.
Ramnarine told Business Day that TT, like other countries were still grappling with ways to stay afloat.
“The circumstances greatly changed since the last budget was read, and no one could have envisaged what the country would experience in May and June, and beyond.
“Given the current circumstances of an economy that has been ravaged by covid19, the decision to remove the fixed retail margins on transport fuels should be deferred until 2022. In the circumstances, the government needs to empathise with what is happening on the ground in this country.”
Ramnarine, last year expressed his full support for government’s move, stating that it was a step in the right direction and if Imbert gets rid of the subsidy, he should also get rid of the levy.
But Ramnarine also cautioned that if oil reached to the range of US$60-$70 per barrel, government may have to reconsider their strategy by putting a cap to the prices at the pump and to intervene with a subsidy to have effective price management.
He added that oil prices have been trending upward and the US economy was recovering which meant and inevitable increase in crude oil prices.
“The US economy is roaring back to life with an expected 6.9 per cent growth in 2021, the highest growth since 1984. That means crude oil prices in the US$80s are not inconceivable.
“Given the current Brent oil price, if we remove the fixed retail margins, we will see approximately a nine per cent increase in the super gasoline price at the pump and a 43 per cent increase in the diesel price at the pump.”
The impact on diesel prices, he said, was of concern because a sharp increase in diesel prices will have an impact on the standard of living across the board.
President of the Petroleum Dealers Association (PDA) Robin Narayansingh, said there has been minimal advancements and discussions on the matter since the announcement by government last year.
He also told Business Day that there has not been any dialogue or meetings in the last few months with Imbert or new Minister of Energy and Energy Industries Stuart Young to facilitate the move forward and he was beginning to worry about the situation for petroleum dealers.
“Our last meeting with Imbert was sometime between December 2020 and January this year, but there were no definite plans on what was coming next.
“We have not been able to make progress with this because I think right now everyone is caught up with the covid19 pandemic which has damaged the economy and livelihoods.”
In early January former energy minister Franklin Khan said a free market in the retail sale of gasoline will be initiated by the end of January and government would bring a second Finance Bill to enact proposals in the budget, including altering the Petroleum Act.
In April Khan again reiterated that government was still set on its plans to float the price of gasoline at the pumps to reflect global changes.
In his budget presentation Imbert had also announced that gas stations owned by National Petroleum Marketing Company (NP) would be put up for sale, with preference to be given to existing dealers first and private sector.
But Narayansingh said this has not been done and he remained concern about a lack of transparency. He said legislation for price liberalisation must be passed, property valuations for each NP station should be conducted and soft financing for existing dealers should be offered to those who wanted to purchase the stations.
He also called on the Imbert to properly specify what was meant by liberalisation of the fuel market because the terms used were conflicting with the reality of the current market and economic situations.
“Is the market really free? Because there is Paria (Fuel Trading Company) who has set prices that they can sell for and is the only company that can bring in fuel into country. So, what then does this really mean for us, the down streamers?
“I do not think we would be free to make our own prices but rather a price range within which to operate. Minister Imbert said he has formula that he is going to propose but it wasn’t shared with us, so we do not know what it is.”
This was a concern Ramnarine also raised and said government needed to allow other companies to import fuel for retail.
Narayansingh added that the PDA wrote to Young about the matter, but they have not received an acknowledgement of their letter.
Imbert noted in October 2020 that in the review and decision to liberalise the fuel market, “the fixed retail margins for all liquid petroleum products will be removed and petroleum retailers and dealers will be allowed to fix their own margins.
“The wholesale margins would remain, and appropriate taxes would be implemented to deal with current fuel surpluses,” he said.
Attempts to reach both Imbert and Young on the status of the matter were unsuccessful.