In many ways, the budget is nothing more than a political document. It is a statement of intent by the government of the day on how it is going to spend money over the 12-month fiscal year, and how it intends to raise revenue to pay for its expenditure.
This is now the 8th budget presented by Finance Minister Colm Imbert, and as we have become accustomed, it does not point a way forward. Instead, it seeks to mislead us into believing that the government is doing a great job in managing the economy, and it does not impart any strategic plan for the country.
The closest we came to the understanding the government’s thoughts on the future of the economy was the declaration that T&T will for a long time depend on the energy sector and therefore we need to fix the sector.
I will be among the first to admit that the energy sector is crucial to the country’s short- to medium-term outlook. It is why like many other commentators, I have used this space to call on, and sometimes call out the government, on the need to stop the inertia, the seeming paralysis, and to act quickly to get the sector going again.
Between 1998 and 2022 we have only had two successful bid rounds, once in the Basdeo Panday regime and the other in the Persad-Bissessar government.
All of the other bid rounds have had little success, including the 2022 deep-water bid round.
The truth is, after the unfortunate arrest of Eric Williams, the appointment of Dr Lenny Saith as Minister of Energy, while still holding the powerful portfolio of Minister of Planning, the appointment of Conrad Enil, and the global economic crash of 2008, and add to that the inability of the late Franklin Khan to get things going, and you can see why as a country we are paying the price of low oil and gas production.
You cannot maintain your production without constant drilling, workovers, and exploration. It just cannot be done. If you are not providing opportunities and holding to account companies with acreage then it will not happen, especially in a mature basin as in T&T.
You have to walk a tightrope that recognises that government must manage and regulate the sector while at the same time understanding that this is a business in which companies must make money in keeping with the kind of risk they are undertaking.
It is why, finally, after years of free advice to this administration, that the country’s fiscal terms in the energy sector have made it uncompetitive, the Minister of Finance is moving to make some of the changes that we all hope will lead to more investment, a more equitable share of the take, and create a bigger pie.
Imbert told the Parliament, “Madam Speaker, we are taking a balanced approach in determining possible changes to the country’s oil and gas tax regime, as it pertains to the upstream energy sector. To incentivise new production, particularly new oil production we have decided in the first instance to adjust our Supplemental Petroleum Tax Regime to motivate oil companies to produce more oil. Over the next 3 months, we will also be looking at adjustments to other energy taxes, again to motivate the oil companies to increase production.”
The Minister has said he does not listen to many in the public square who offer the government advice but the reality is that our oil production remains the lowest it has been since independence and natural gas production is woefully short of installed capacity. In short, the much-touted windfall we are experiencing is much lower than we could have, had our production not been so low.
T&T should not be buoyed by the improved revenue streams because they seek to mask the reality of the low production.
The recalcitrance of the government to taking good advice, often from the very people they appoint to give them advice, has real costs for the country. It has been six years now that the Economic Development Board and many others urged the government to remove the subsidies on fuel or at least cap it. The government refused to do it. At that time crude prices were low and it would not have caused the kind of hardship that the present increase in fuel prices will have. That does not mean I don’t support the move. I have been on the record pleading with the government to reduce its heavy subsidies bill and that changes to the fuel prices were necessary since this was nothing but a regressive measure that favours those with resources more than it does the poor.
The question that has to be asked is what could we as a country done with the billions we spend on subsidizing gas prices over the years? As a country, we have to make choices and we have to ask if a billion dollars is better spent on supporting low fuel prices or used to fix the transportation woes, improve health care, or fix the road network.
For the Prime Minister and the Minister of Finance to now talk about the opportunity cost to the country of the years of their own policy position is playing smart with foolishness.
So yes this is the right move and while it comes before a proper public transportation system and while there was no mention of this in the budget speech one has to hope the government does what must be done to expand the capacity of the bus service and its efficiency.
The space of this column does not allow us to deal with each measure in detail but the final issue I want to raise today is the price projections of the budget. The Minister estimates that crude prices will average US $92.50 a barrel and gas at USD$6 an mmbtu.
Now while we do not as a country set prices and they are out of his hands and our real issue is on the production side, these are the highest prices ever used as the basis for the budget. I hope they are realised but I fear that the real strategy of setting them so high is to avoid having to put any into the Heritage and Stablisation fund as would be required by law. If true it’s a cynical approach since it’s the very HSF that saved us in the pandemic.