Unipet chairman Dr Afraz Ali is admitting to being concerned about the reliability of fuel supplies with the closure of the Petrotrin refinery.
Ali said, “the supply and reliability of supply is key and critical because we depend on that. We have to have comfort that there will be a continuous supply of petroleum so we can engage in our business.”
Speaking on CNC3’s Business Watch on Wednesday night, Ali said he felt little comfort by assurances from Energy Minister Franklin Khan that there is no need to be concerned about supplies.
“If one knows about the international market and procuring fuel on the international market, these things are done months in advance. If you going in with a short time frame you will not get the best prices,” Ali said.
Ali said the prices at which the fuel is imported will be in US dollars “and then to sell to the local economy in TT dollars, there are lots of questions and lots of dark areas in this process and this train of events that we need very much clarity on.”
Asked whether he expected Finance Minister Colm Imbert to adjust the fuel prices in Monday budget, Ali said, “There are a lot of questions right now and there are no answers.”
He said the “single policy decision” taken to shut down the Petrotrin refinery changes the entire environment of the liquid fuel petroleum industry.
“Come the first week of October, the last batch of crude will go through the refinery. In so doing, one will expect production of liquid fuels will cease at the end of October.”
He said that means “we will have fuel produced by Petrotrin until the third or fourth week in November, in that short eight-week period we need to find out who will supply the market with fuel. Is it going to be Petrotrin, is it going to be the marketing companies availing themselves to open market bidding?”
If it’s Petrotrin that’s importing fuel at international prices to supply the local market, Ali said: “it means with respect to how the subsidy is crafted, that goes away completely, because the local market is no longer the recipient of what we taking out of the ground and producing.”
He expects that the signal sent by Imbert last October to move the pricing structure to one where there is more fluidity in prices at the pump will be announced in the budget.
However, Ali said it would be up to those in authority to make “a policy decision as to do we leave the price at the pump as is, or do we make the adjustment based on the formula worked out.”
“This is not new maths, it is all over the world, it is just whether we are able to make the adjustment having been nurtured on a subsidy over the years. The adjustment will be even more difficult as we expose ourselves to international prices and all the other charges that come with that, as you bring it into the country and distribute,” Ali said.
T&T Manufacturers Association president Ramesh Ramdeen, another panellist on the programme, conceded that the days of cheap fuel may be over. But he said consideration must be given to the impact any increase will have.
“It needs to be on a phased basis. I hope the right decision is made so that the subject is not removed overnight.”
Ramdeen said if the subsidy is removed and fuel prices increase there will be a domino effect on prices of fuel that feed into “transportation that moves goods and services, trucks, tractors, agricultural products and diesel used in production. These increases could have a domino effect on goods and services and retail prices at stores.”
While he expects that something is going to happen, he said they are waiting to see what the Government will do. However, Ramdeen said he believes the Minister needs to “dovetail the economics and political considerations in making such a decision because we don’t want to erode our competitiveness or shoot ourselves in the foot. We talking diversification, we talking about growing the manufacturing sector, but we need to create the enabling environment for the sector to grow.”
Adjustments, he said, will be a “bitter pill to swallow.”
“I highly hope that the Minister will not move from one decision to the next, removing the subsidy should be gradual to allow those affected to absorb the transitioning process.”
Another panellist, economist Gregory McGuire, said he expects “some movement in fuel prices” when Imbert presents the budget on Monday. However, he said he does not expect any significant increases, “given the disquiet around the closure of Petrotrin”
But he reminded the population that the Minister did set out the basis for adjusting prices when he presented the budget in October last year. The cost of oil when the last budget was presented was under fifty dollars, today it is about $80 he noted.
McGuire said if Imbert “sticks to his word we should expect some movement in fuel prices.”