While this may sound like a reasonable point, it seems to me that the world has moved away from subsidies which benefit everyone to targeted subsidies. So it would be perfectly permissible for the Government to eliminate subsidies on premium and regular gasoline, but maintain some level of subsidy on diesel, which fuels most of the transport in the country, and on the inter-island ferry (the subsidy on aviation fuel for Caribbean Airlines is another issue altogether). Also, the link that some people make between the reduction in the gasoline subsidy and higher transport costs-and therefore higher cost of living-is not a sustainable argument. In delivering the 2009 budget, in August 2008, Ms Tesheira announced an increase in the price of premium gasoline from $3.00 per litre to $4.00 per litre. That's a 33 per cent hike. She said: "This measure will affect the high end of the market and will take immediate effect. The price for other grades of fuel will be retained. We envisage that there would be no increase in the cost of transportation charged by maxi taxis, buses, the majority of taxis and other transport vehicles that use diesel and super unleaded fuel for which the prices have been maintained.
Mr. Speaker, the savings from this measure is estimated at $200m." Did the 33 per cent increase in the price of premium gasoline have an impact on the cost of transportation? Did it have an impact on the rate of inflation? It would be instructive to note that after peaking at 15.35 per cent in October 2008, the rate of inflation declined, slowly at first and then in January 2009, it started plummeting. The inflation rate fell from 11.65 per cent in January 2009 to 1.3 per cent in December of that year. Also, the evidence from the United States, where gasoline prices fluctuate on a daily basis, does not support the view that higher fuel prices necessarily lead to a higher rate of inflation.
