An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

As an­tic­i­pa­tion builds ahead of T&T’s bud­get on Mon­day, de­bate con­tin­ues over whether the Gov­ern­ment should con­sid­er re­duc­ing fu­el prices at the pump or re­vis­it the long-promised lib­er­al­i­sa­tion of the liq­uid pe­tro­le­um fu­els mar­ket first an­nounced in 2021, by the last ad­min­is­tra­tion.

Dur­ing that bud­get pre­sen­ta­tion, then min­is­ter of fi­nance, Colm Im­bert, high­light­ed the pol­i­cy shift aimed to bring T&T in line with in­ter­na­tion­al prac­tice by al­low­ing mar­ket forces to de­ter­mine re­tail fu­el prices.

Un­der the frame­work that was pro­posed by Im­bert, fixed re­tail mar­gins for all liq­uid pe­tro­le­um prod­ucts would have been re­moved, al­low­ing gas sta­tion op­er­a­tors and fu­el deal­ers to set their own mar­gins.

While whole­sale mar­gins were to re­main tem­porar­i­ly fixed, the last ad­min­is­tra­tion in­di­cat­ed that a mod­est tax would be in­tro­duced to off­set any sur­plus prof­its aris­ing from low glob­al oil prices.

“Im­por­tant­ly, prices at the pump would now move up or down in re­sponse to in­ter­na­tion­al mar­ket trends. Ad­just­ments would be guid­ed by prices pub­lished in the Platts Oil­gram Price Re­port, a wide­ly recog­nised bench­mark for glob­al pe­tro­le­um prod­uct prices,” Im­bert said back then.

He in­di­cat­ed that LPG (cook­ing gas) would re­main sub­sidised to pro­tect vul­ner­a­ble house­holds.

In that bud­get pre­sen­ta­tion, Im­bert fu­el lib­er­al­i­sa­tion would have re­shaped the down­stream pe­tro­le­um land­scape and Na­tion­al Pe­tro­le­um (NP)-owned gas sta­tions were to be of­fered for sale to the pri­vate sec­tor, with first pref­er­ence giv­en to ex­ist­ing deal­ers and con­ces­sion­aires.

Speak­ing to the Busi­ness Guardian on Tues­day, Own­er Deal­ers As­so­ci­a­tion pres­i­dent Reval Chater­goon said for mo­torists and busi­ness op­er­a­tors, fu­el prices re­main one of the most vis­i­ble in­di­ca­tors of eco­nom­ic man­age­ment. But be­hind the pump price lies a com­plex net­work of sub­si­dies, trans­fers, and op­er­a­tional in­ef­fi­cien­cies that con­tin­ue to de­fine the coun­try’s re­tail fu­el in­dus­try, he said

At present, he out­lined that su­per, pre­mi­um, and diesel are priced at $6.97, $7.75, and $4.41 per litre, re­spec­tive­ly. These rates have re­mained un­changed since the last up­ward ad­just­ment on Sep­tem­ber 26, 2022, when Im­bert pre­sent­ed the 2023 bud­get. Fu­el prices have re­mained sta­ble even as in­ter­na­tion­al oil prices have soft­ened sig­nif­i­cant­ly. Ac­cord­ing to Bloomberg da­ta, West Texas In­ter­me­di­ate crude cur­rent­ly trades around US$62per bar­rel, while Brent crude is ap­prox­i­mate­ly US$66.

“By con­trast, in 2018, then Fi­nance Min­is­ter Colm Im­bert had in­di­cat­ed that at an oil price of US$73 per bar­rel, the un­sub­sidised cost of su­per and diesel should be $5.47 and $4.93 per litre re­spec­tive­ly. Based on to­day’s low­er oil prices, there is there­fore fis­cal room, at least on pa­per, for the Gov­ern­ment to re­con­sid­er the ex­ist­ing pump prices,” he de­tailed.

For Chater­goon, any mea­sure that in­creas­es cit­i­zens’ dis­pos­able in­come should be sup­port­ed.

Low­er fu­el prices, he be­lieves, would ease the bur­den on house­holds and po­ten­tial­ly stim­u­late eco­nom­ic ac­tiv­i­ty.

“Re­duced month­ly spend­ing on fu­el could trans­late in­to high­er spend­ing on es­sen­tials such as food, ed­u­ca­tion, health­care and home im­prove­ment, feed­ing di­rect­ly in­to con­sumer de­mand.”

The ar­gu­ment is not with­out mer­it, he said trans­porta­tion costs form a crit­i­cal in­put across al­most every sec­tor of the econ­o­my. A re­duc­tion in pump prices could, in the­o­ry, low­er dis­tri­b­u­tion costs for goods and ser­vices, par­tic­u­lar­ly in man­u­fac­tur­ing, lo­gis­tics and re­tail. It could al­so pro­vide re­lief to small en­tre­pre­neurs and com­muters who face the cu­mu­la­tive ef­fect of ris­ing liv­ing costs.

How­ev­er, Chater­goon not­ed fis­cal pru­dence com­pli­cates this equa­tion, as T&T con­tin­ues to op­er­ate with­in a tight rev­enue en­vi­ron­ment, and fu­el sub­si­dies, though much re­duced com­pared to a decade ago, still rep­re­sent a sig­nif­i­cant ex­pen­di­ture item for the state.

He said the re­al chal­lenge is strik­ing a bal­ance be­tween main­tain­ing so­cial re­lief and en­sur­ing the sus­tain­abil­i­ty of the na­tion­al bud­get.

“The coun­try has faced per­sis­tent deficits in re­cent years, and low­er­ing fu­el prices with­out com­pen­sat­ing for rev­enue mea­sures could widen that gap.”

The ques­tion of in­dus­try ac­count­abil­i­ty

While pub­lic de­bate tends to fo­cus on con­sumer prices, Chater­goon be­lieves that equal at­ten­tion must be paid to how the lo­cal fu­el dis­tri­b­u­tion sys­tem op­er­ates. The re­tail fu­el in­dus­try, he ar­gues, has long suf­fered from lim­it­ed con­sul­ta­tion, poor over­sight and opaque fi­nan­cial man­age­ment.

One of his key con­cerns is the lack of trans­paren­cy in how fu­el sub­si­dies and trans­fers are struc­tured and dis­bursed. The sys­tem, as it stands, does not clear­ly de­lin­eate be­tween sub­si­dies in­tend­ed for fu­el pric­ing and oth­er forms of trans­fers to state-owned en­ti­ties. This, he warns, blurs ac­count­abil­i­ty and makes it dif­fi­cult to de­ter­mine who ul­ti­mate­ly ben­e­fits from state fund­ing.

He al­so ques­tioned the ra­tio­nale for dis­trib­u­tors claim­ing sub­si­dies when the State al­ready bears the full cost of im­port­ed fu­el through Paria Fu­el Trad­ing Com­pa­ny.

The is­sue, he sug­gests, is not on­ly fi­nan­cial but struc­tur­al, re­flect­ing a wider pat­tern of in­ef­fi­cien­cy that has plagued the down­stream fu­el in­dus­try for years.

For the 12-month pe­ri­od end­ed Sep­tem­ber 30, 2023, Paria Fu­el Trad­ing re­port­ed $10.6 bil­lon in rev­enue and for the pre­vi­ous fi­nan­cial year it record­ed $14.1 bil­lion.

What is cer­tain, he says, is that greater over­sight and ac­count­abil­i­ty are need­ed to en­sure that sub­si­dies serve their in­tend­ed pur­pose rather than per­pet­u­at­ing in­ef­fi­cien­cies with­in state en­ti­ties.

Dif­fer­ent views on ad­just­ment

The call for a fu­el price re­view is not unan­i­mous. Pe­tro­le­um Deal­ers’ As­so­ci­a­tion pres­i­dent Robin Nar­i­nesingh be­lieves that while price re­lief is de­sir­able, it must be con­sid­ered with­in the broad­er fis­cal pic­ture. With the coun­try still re­cov­er­ing from years of eco­nom­ic strain and a po­ten­tial bud­get deficit of $9.67 bil­lion for fis­cal 2025 with a loss of $556.7 mil­lion in rev­enue, he cau­tions that re­duc­ing prices could un­der­mine Gov­ern­ment’s abil­i­ty to fund es­sen­tial ser­vices such as in­fra­struc­ture re­pair, ed­u­ca­tion, and health­care.

He ar­gued that tar­get­ted re­lief, rather than across-the-board price cuts, would be more ef­fec­tive. Sec­tors such as agri­cul­ture, fish­eries, and small man­u­fac­tur­ing, which re­ly heav­i­ly on fu­el for pro­duc­tiv­i­ty rather than con­sump­tion, could be pri­ori­tised through spe­cial al­lowances or re­bates.

Nar­i­nesingh al­so high­lights a long-stand­ing is­sue of ne­glect faced by the down­stream pe­tro­le­um sec­tor, which he de­scribes as one of the most crit­i­cal yet over­looked com­po­nents of the na­tion­al econ­o­my. Fu­el dis­tri­b­u­tion un­der­pins trans­porta­tion, lo­gis­tics, and every­day mo­bil­i­ty, and any in­sta­bil­i­ty in the sec­tor would have far-reach­ing con­se­quences for both busi­ness­es and the pub­lic, he said.

A mea­sured ap­proach

For­mer en­er­gy min­is­ter Kevin Ram­nar­ine of­fers a more cau­tious per­spec­tive. At cur­rent in­ter­na­tion­al oil prices, he be­lieves the sub­sidy li­a­bil­i­ty re­mains man­age­able, and as such, there is no im­me­di­ate need to ad­just pump prices. How­ev­er, he notes that the sit­u­a­tion could change quick­ly de­pend­ing on glob­al mar­ket move­ments.