While Finance Minister Larry Howai says there is no need to worry about the recent downward movement in the price of oil, officials of state-owned Petrotrin are analysing and reviewing the situation to see how this trend affects the company's operations. Petrotrin President Khalid Hassanali says the drastic drop in oil prices will affect the energy company's gross revenue.
Oil production is a major source of revenue to government and Hasanali said falling prices will result in a shortfall of revenue and taxes for T&T Government based on its 2014/2015 Budget on an oil price of US$80 per barrel and a gas price of US$2.75 per mmbtu.
Government has budgeted to receive approximately $ 60.3 billion in revenue most of which is expected to come from the oil and gas sector. If the situation continues, Petrotrin might be forced to cut cost but officials said all areas of expenditure will be carefully analysed and decisions will be made based on the critical nature of various areas of expenditure.
Also keeping a close watch on the situation is the Energy Chamber which pointed out that while T&T produces far more natural gas than oil, the drop in oil prices has obvious implications for the country's economy as crude oil accounts for 17 per cent of total exports while refined petroleum products accounts for another 16 per cent.
"Nevertheless, we need to be wary of the current situation. The last time we experienced significant declines in oil prices in 2008 other commodity prices also rapidly followed. Trinidad and Tobago must therefore monitor all of our commodity export prices carefully and be ready to revise expenditure in line with falling revenue if prices remain low," the Chamber said.
Daphne Bartlett, President of the San Fernando Business Association (SBA) said Howai is right to the extent that there is no cause for worry as yet. However, she said, this is an appropriate time for Howai to adjust his expenditure.
"We are still within the confines of US$80 but he still has to plan ahead. We do not depend solely on the oil, we still have gas. Be that as it may, we still have to be planning a sort of parallel budget as far as expenses goes, so if in fact it does dip below the budget price we will have to curb spending in certain areas."
She said one of the key areas people keep talking about is the make work programmes where you really don't get value for money.
"There are other areas you will have to cut, but we could always adjust the budget to match income."
Pointing out that the budget should have been pegged to a more conservative figure, Bartlet said she is concerned that T&T has grown accustomed to surplus budgets in the last few years and the new price structure is cutting it very close.
"Especially considering what is happening globally with Saudi Arabia flooding the market and not cutting production. I feel the price will continue to dip," she predicted.