The de­ci­sion by the gov­ern­ment to lib­er­alise the fu­els mar­ket is long over­due and in the best in­ter­est of the coun­try.

This col­umn has been on record sug­gest­ing that the lev­el of sub­si­dies and trans­fers that the gov­ern­ment is car­ry­ing un­du­ly bur­dens the state, is not the best way to spend tax­pay­ers mon­ey and in the case of the fu­el sub­sidy dis­pro­por­tion­ate­ly ben­e­fits those best po­si­tioned to pay.

The re­moval of the sub­sidy has been hint­ed for years, not just by Min­is­ter of Fi­nance Colm Im­bert but his pre­de­ces­sors and it is one of the rea­sons for the for­ma­tion of the NGC CNG Com­pa­ny Ltd.

Ac­cord­ing to the 2021 State En­ter­prise In­vest­ment Pro­gramme the NGC was man­dat­ed to ex­pand and up­grade its cur­rent gas dis­tri­b­u­tion net­work to sup­ply CNG to fill­ing sta­tions across Trinidad. NGC was fur­ther man­dat­ed to ac­cel­er­ate the use of CNG as a ma­jor al­ter­na­tive fu­el in T&T.

Ac­cord­ing­ly, NGC in­cor­po­rat­ed NGC CNG Com­pa­ny Ltd (NGC CNG), a whol­ly owned sub­sidiary to im­ple­ment the CNG Ini­tia­tive.

The orig­i­nal es­ti­mat­ed cost of this ini­tia­tive for Phas­es I & II was $2.07 bil­lion for a five-year pe­ri­od.

You see the idea was to give the coun­try an op­por­tu­ni­ty to tran­si­tion to a cheap­er and clean­er fu­el so that it re­duced the con­sump­tion of pe­tro­le­um prod­ucts, which at the time of the ini­tial plan meant more re­fined prod­ucts for ex­port sale and it al­so al­lowed the coun­try to re­duce its car­bon foot­print.

It frees up re­sources which the gov­ern­ment will hope­ful­ly spend wise­ly as it tries to get T&T out of the eco­nom­ic chal­lenge if faces.

Dur­ing Mon­day’s Bud­get, Im­bert told the Par­lia­ment that since 2006 the fu­el sub­sidy has been pro­vid­ed at great fis­cal costs and in the fis­cal pe­ri­od 2006 to 2020, the sub­sidy pay­ments made by Gov­ern­ment was in the vicin­i­ty of $25 bil­lion.

“We are of the view that in the con­text of the pro­ject­ed in­ter­na­tion­al oil prices, the fu­el mar­ket should be lib­er­alised. Un­der this arrange­ment, which is tar­get­ed for in­tro­duc­tion in Jan­u­ary 2021, the fixed re­tail mar­gins for all liq­uid pe­tro­le­um prod­ucts will be re­moved; Pe­tro­le­um re­tail­ers and deal­ers will now be al­lowed to fix their own mar­gins.” Im­bert said.

I sup­port the de­ci­sion of the Min­is­ter of Fi­nance to lib­er­alise the fu­els sec­tor. I am how­ev­er con­cerned that the an­nounced plan to di­vest it­self of all NPs ser­vice sta­tions could lead to price goug­ing and the for­ma­tion of car­tels and there­fore price fix­ing.

In a tru­ly free mar­ket there is an as­sump­tion of sup­ply and de­mand de­ter­min­ing prices. But al­so built in­to that as­sump­tion is the is­sue of com­pe­ti­tion with sev­er­al buy­ers and sell­ers in the mar­ket place.

Com­pe­ti­tion al­lows for greater ef­fi­cien­cy and there­fore the best prices and ser­vices.

In the con­text of the sale of the NP ser­vice sta­tions and the abil­i­ty of the gas sta­tion own­ers and op­er­a­tors to set their own prices and there­fore de­ter­mine their own prof­its, this is in keep­ing with what hap­pens in a free mar­ket. But the cen­tral chal­lenge is one of com­pe­ti­tion.

Let me demon­strate the dan­ger to large parts of the coun­try. If you dri­ve from Guayagua­yare to San­gre Grande, a two-hour dri­ve, you on­ly have the op­tion of go­ing to two fu­els sta­tions.

In Ma­yaro there is on­ly one gas sta­tion. From Guayagua­yare to Mon Re­pos, San Fer­nan­do you have a grand to­tal of four gas sta­tions, a dri­ve of two and a half hours. From Guayagua­yare to Ch­agua­nas us­ing the route through Tabaquite, an­oth­er two and a half-hour dri­ve you will have ac­cess to four gas sta­tions.

From Rio Claro to San­gre Grande via Biche you have a to­tal of three gas sta­tions, an­oth­er two hour dri­ve. In oth­er words in many ar­eas of this coun­try there are mo­nop­oly and oli­gop­oly sit­u­a­tions and mo­torists will be at the mer­cy of those fu­el sta­tion own­ers and op­er­a­tors.

I chose these ar­eas not by ac­ci­dent but al­so be­cause suc­ces­sive stud­ies have shown that these are places that have among the high­est lev­els of pover­ty in the coun­try.

These are al­so places where the pub­lic trans­porta­tion ser­vices are poor, with two bus­es a day avail­able to res­i­dents.

In ad­di­tion, these are parts of the coun­try where the road in­fra­struc­ture is poor, ow­ing to the num­ber of land­slips and the use of the road by large trucks car­ry­ing heavy equip­ment to ser­vice the oil and gas sec­tor. Ve­hi­cle main­te­nance is high in these parts of the coun­try. It is al­so a place where 2.5 bil­lion stan­dard cu­bic feet (bscf) of nat­ur­al gas a day is pro­duced and over 20,000 bar­rels of oil per day and where the res­i­dents are among the least ben­e­fi­cia­ries of gov­ern­ment sup­port and ser­vices.

How is the gov­ern­ment go­ing to pro­tect these cit­i­zens? How can the Min­is­ter of Fi­nance or the Prime Min­is­ter say with a straight face that left to mar­ket forces, the peo­ple of these area will be pro­tect­ed.

When you are a Port-of-Spain or ur­ban-based po­lit­i­cal par­ty it is easy to make the er­ror and as­sume what may work in the ur­ban ar­eas will be good for the rest of the coun­try. This is not the case here. The com­par­isons to the US sit­u­a­tion where you have choice and can go to an­oth­er ser­vice sta­tion is based on the ubiq­ui­tous na­ture of ser­vice sta­tions there, it does not work in places where choice is lim­it­ed or as in Ma­yaro no choice.

These are ar­eas where the dri­ve is so far be­tween ser­vice sta­tions that it is not prac­ti­cal to try an­oth­er sta­tion and where CNG was nev­er a vi­able op­tion ow­ing to the lack of CNG sta­tions. They are places where the res­i­dents, as I have said of­ten, are the least ben­e­fi­cia­ry of gov­ern­ment pro­grammes and yet the re­sources are ex­tract­ed from these ar­eas.

Yes high­er prices may make oth­er peo­ple want to con­struct ser­vice sta­tions but what are the bar­ri­ers to en­try? What would the li­cens­ing process look like? Are we go­ing to de­pend on the Min­istry of En­er­gy to reg­u­late the in­dus­try? This Min­istry of En­er­gy that has failed to and can­not reg­u­late the steal­ing of the coun­try’s re­sources through il­le­gal quar­ry­ing? A Min­istry of En­er­gy that is bad­ly un­der­staffed and where the best pro­fes­sion­als are quick­ly snapped up by in­dus­try, lead­ing to a re­volv­ing door? Sure­ly we could bury our heads in the sand and pre­tend not to know but the min­istry will fall down on the job again.

Im­bert says when the mar­ket is lib­er­alised in less than three months, the Gov­ern­ment does not ex­pect price goug­ing nor the for­ma­tion of car­tels to fix the price of fu­el.

Speak­ing to jour­nal­ists af­ter a post-Bud­get fo­rum host­ed by the T&T Man­u­fac­tur­ers’ As­so­ci­a­tion yes­ter­day, Im­bert in­sist­ed that there will be com­pe­ti­tion among the deal­ers and there­fore no fix­ing of prices.

“I am not sure that will hap­pen eh. There are in to­tal around 200 gas sta­tions in the coun­try, I don’t think that will hap­pen and I think there will be suf­fi­cient com­pe­ti­tion. But I am tak­ing note of what you have to say.”

Im­bert added, “The deal­ers and the con­ces­sion­ers will in Jan­u­ary set the price from the whole­salers and sell it at a price they think is ap­pro­pri­ate. So I think there will be com­pe­ti­tion; that is why we don’t be­lieve there will be any sig­nif­i­cant change in the price. Once the price of oil re­mains the same. We don’t think so.”

For too long these ar­eas have been un­fair­ly bur­dened and un­fair­ly treat­ed by suc­ces­sive gov­ern­ments. For too long there is no thought about how mea­sures af­fect the whole coun­try and not just the ur­ban cen­tres. This gov­ern­ment has fo­cused on the North West and To­ba­go. It has ig­nored most of the rest of the coun­try un­less, like the road to and port in To­co, it is fo­cused on ad­vanc­ing the in­ter­est of To­ba­go.

I am all for free en­ter­prise and pri­vati­sa­tion but the gov­ern­ment must in the bud­get de­bate start­ing to­mor­row tell us how this mea­sure is go­ing to work so that there is com­pe­ti­tion and those in rur­al ar­eas can al­so pay a fair price for fu­el.