When Minister of Finance Larry Howai presents his first budget in about two months time he will become the Finance Minister facing the lowest oil production since Independence. Figures from the Ministry of Energy show that, as of May 2012, oil production was only 85,000 barrels a day, down from over 101,000 barrels a day two years ago, when the People's Partnership took office. This means that in the last two years there has been a 15 per cent drop in oil production and with crude prices being close to US$100 a barrel the Minister of Finance could have earned an additional $1.5 billion per annum had crude production remained at 2010 levels. Chief economist at Republic Bank, Dr Ronald Ramkisson, said Howai will be inheriting a situation where there is pressure on energy sector revenues, particularly if prices are lower in coming fiscal year than they were during this fiscal year.
He said: "It is often difficult to forecast where oil prices will end up but the expectation is that prices will remain under US$100 a barrel and I think most people feel it will be in the US$80 a barrel range." Dr Ramkisson said the price that T&T has been receiving for its natural gas has been higher than budgeted and, while the country may not be able to increase crude production in the next fiscal year, the Minister of Finance will have to hope that some of the shortfall will be made up by higher natural gas production. With crude production already down, the Minister of Finance will have to deal with the fact that more than a quarter of the country's production has to be subsidised because of the fuel subsidy. Dr Ramkisson said this is another reason why the minister must signal the need to move away not just from the fuel subsidy, but he must reduce the level of subsidies throughout the economy. Former chairman of state-owned Petrotrin, Malcolm Jones, said that the value of a barrel of refined product was generally higher than a barrel of oil. In that context, he said the country was not only paying a subsidy, estimated at $4 billion in 2011/2012, but was missing out on an opportunity to earn significant revenues. Both Jones and Ramkissoon agreed that the Minister of Finance and the Government have to ensure that the country moves speedily along the road of converting a high percentage of the country's vehicles compressed natural gas. Ramkissoon, Republic Bank's chief economist, added that the Government needed to eliminate the leakage that was occurring in the system.
He said one area is that of the illegal sale of diesel fuel and there was also "a sense that not everyone is paying his or her fair share to the Government." Dr Ramkissoon said: "The Minister of Finance will have to ensure that he collects all that is due to him. In that respect there is a sense that not everyone is paying his or her fair share to the Government and in that respect we have to ensure that all taxes are paid and I do not consider the land and building tax to be a new tax."
He said the Government had done a bad job over the last two years in implementing projects. He said the People Partnership's inability to implement projects was unfortunate because it is only by government's capital expenditure that it can then "crowd the private sector into the economy" and have private sector investment.He lamented that what has occurred is that the Government has only been able to spend money on recurrent expenditure much of which will not allow for future growth of the economy.He also cautioned the Minister of Finance that he needed to start to reduce the country's debt even though he accepts that this will take some time. Republic's chief economist said the government cannot just borrow if the economy is not growing because it will then lead to debt to GDP problems and what the Finance Minister needs to do is to over time get expenditure in line with revenes. To achieve that will require both growth and a reduction of expenditure.
