T&T cannot afford to continue subsidising cheap fuel prices and the country will have to eventually fade it out. That is the view of Dr Thackwray Driver, chief executive officer of the Energy Chamber. Driver told the Business Guardian that the money being spent on the fuel subsidy should be redirected to improving the country's transportation system. Only last week at the National Energy Consultations, Raymond Franco, a member of the Government-appointed Compressed Natural Gas (CNG) Task Force, said that $1.3 billion was spent last year to keep diesel prices low and that maxi-taxis alone were supported to the tune of more than a $250 million, or an average of $59,000 a maxi-taxi.
Frank Look Kin, chairman of the CNG Task Force, said it was one of the reasons Government was trying to provide an alternative fuel in CNG and that it will give the Government "options" if it decides to reduce or eliminate the fuel subsidy. Look Kin said that an increase in transportation cost will also increase the cost of goods but, he said, the increased benefits of CNG, including the opportunity for consumers to buy cheaper fuel, must be taken into account. Last year the subsidy was $2.7 billion. That figure is expected to rise as crude prices increase.
The US Energy Information Administration (EIA) is predicting that the price of West Texas Intermediate (WTI) crude oil will average about US$93 a barrel in 2011, US$14 higher than the average price last year.
For 2012, the EIA expects WTI prices to continue to rise, with a forecast average price of US$99 a barrel in the fourth quarter 2012. Speaking in an interview on Tuesday, Driver said the projected increase in crude prices comes at a time when the country cannot afford to put more money into the fuel subsidy.
"This time around, the fuel subsidy is increasing at a time when natural gas prices remain relatively low.
"During the last spike, gas prices were high and that helped the country's economy to deal with higher fuel subsidies.
This time around, oil prices are high but, gas prices remain weak, so we will have less revenue and will have to spend more on fuel subsidies. They have to be phased out." Driver said the Government has to provide an alternative fuel which is cost-effective and accessible and then it can gradually remove the subsidy. The fuel subsidy cannot be removed in one fell swoop, he said. Former energy minister Conrad Enill said T&T will have to make a choice between containing inflation and spending billions of dollars in keeping fuel prices cheap. Enill said this was a clear choice the country had to make since it was costing taxpayers close to $2.7 billion to protect prices at the pump.
Speaking in an interview on Tuesday, Enill said the fear is that there will be an increase in the cost of goods and services, particularly in the food sub-sector and, in the circumstances, a decision was taken to keep the fuel subsidy and work towards making CNG an alternative fuel. Driver said the solution was the establishment of an efficient transportation system. He said the country will lose valuable foreign exchange by continuously subsidising fuel. "We already have low crude production and, added to this, the rising cost of oil. This will only hurt our foreign exchange position. It is also not the best and efficient use of our resources," Driver said.
Franco also told the conference that the CNG Task Force was seeking to have the entire fleet of buses of the Public Transport Services Corporation (PTSC), all government and State-owned vehicles, maxi-taxis and those people driving long distances, converted to CNG. Franco said since its introduction on a commercial basis in 1991, CNG use peaked in T&T and has been declining since. He acknowledged there were mistakes made in the manner in which CNG was introduced on the last occasion, but said this time around, vehicles will be outfitted with a lighter tank, there will be CNG stations capable of filling up tanks in less than three minutes and there will be a better network of CNG stations.
Energy correspondent