Although it is difficult to predict the prices of oil and gas, senior economist Dr Ronald Ramkissoon is recommending that T&T be conservative in its outlook for energy prices."It is very difficult to accurately predict oil prices in this environment because of the fundamental types of changes that are taking place globally. As economists we understand that certain dynamics are always at play, so once the prices started to fall we understood that would lead to a cutback in investments and we understand that leads to a greater demand," he explained
After dropping to close to a six-year low in January, the price of oil has rallied in recent weeks. Ramkissoon said inevitably prices will be higher but the question is when.
"The futures market–that is the market for oil to be determined at future dates–should begin to expect that prices at some point are going to higher than they are today. And you would find that gradually that as supply declines, because companies are not investing as they once were or as companies increase inventories, that at some point the effect of these developments lead to an increase in prices once more," he said.He added that it would be "reasonable" to expect energy prices to remain on the lower end for the next few years.
"I think it is quite early to expect any sustained increase in prices and I think it is sensible for countries to use average prices. In other words you take a long view of what is likely to happen. I think the two year and three year time frame of relatively low prices are still a reasonable kind of assumption.
"We must understand the volatility and vulnerability of a country such as ours and the need for dealing with revenues on the supply side that is to increase sources of non energy revenues and to use much more wisely the revenues we have been collecting from this depleting asset," he said.Dr Roger Hosein, senior lecturer at University of the West Indies (UWI), said oil comprises a small percentage T&T's energy exports.
"For T&T such low oil prices mean lower revenue from the exports of oil. However, oil is a relatively small share of T&T energy exports. T&T exports LNG, ammonia, methanol, urea, iron and steel, and other petrochemical products."T&T's natural gas and downstream natural gas industries contribute a significantly more to the Government of T&T's taxation revenue than crude oil. In fact, the bulk of the crude oil produced in T&T is refined into refinery products (gasoline, diesel, heating oil, etc.)
The crude oil that is exported tends to be the heavy crude found off the north coast of T&T which are too heavy for Petrotrin's refinery to process and refine," he said.Hosein said this situation calls for diversification of the economy."From a generalised perspective the fall in the price of oil would mean that more than ever we need, in the context of low crude oil production and stagnant gas production, to push for diversification.
"The diversification thrust of the government in this regard by opening up economic space between San Fernando and Point Fortin has to be commended and the highway to Mayaro from San Fernando supported, providing we find a suitable financing vehicle," he said.