Ten days from now, the price of super and premium gasoline will be increased by $1, the cost of diesel will be increased by $.50 and the cost of kerosene will increase by $2, as the Government moves to reduce the fuel subsidy.
This announcement came from Finance Minister Colm Imbert in Parliament on Friday, after the debate on local government reform was adjourned.
Imbert said the price of super gasoline will be increased from $4.97 to $5.97, premium gasoline from $5.75 to $6.75 and diesel will be increased by $.50 to $3.91. The Finance Minister said 20-pound cylinders of LPG will remain subsidised and will still cost consumers $21 but the Ministry of Energy will be revising the cost of 100-litre cylinders for commercial customers.
Imbert said due to the global, rapid increase in the price of oil, the Government felt it would be wiser to reduce the fuel subsidy, as allowances were not made for a high subsidy in the 2022 budget.
As he outlined the factors driving the increase in oil prices, including the Russian invasion of Ukraine, Imbert said it was unsustainable for the Government to continue to bear the brunt of the fuel subsidy.
“Based on all useable, available information and advice, therefore, the Ministry of Finance is of the view that it is reasonable to estimate that oil prices will average US$95 per barrel in fiscal 2022. At US$95 per barrel, the total fuel subsidy cost to be paid will be $2,122,350,212 ($2.12 billion), with a direct Government subsidy liability of $1,686,668,041 ($1.69 billion),” he said.
The Petroleum Production Levy, which mandates oil companies to contribute to the cost of the fuel subsidy, will reduce that $2.1 billion to $1.69B. But this will not be enough of a reduction, he said.
“This level of fuel subsidy is unbudgeted and unsustainable,” Imbert said.
He said the budgeted subsidy for 2022 was $216,632,514, some $1.47 billion less than what was currently required to keep prices at the pump the same for consumers.
As he compared fuel prices around the world to T&T’s, Imbert said the Government felt it could put the money previously used to subsidise fuel to better use in other sectors.
“There are many competing demands for scarce resources in Trinidad and Tobago at this time and the Government is of the view that it is not productive, equitable, or prudent to spend an unbudgeted $1.69 billion or $1.47 billion more than planned subsidising fuel in 2022. This money could be far better utilised in the social services sector, in the health sector, in our capital development programme, on VAT refunds and on clearing off unpaid bills owed to contractors and suppliers of goods and services, just to name a few areas,” he said.
But higher prices at the pumps do not mean the Government will not be subsidising fuel at this time.
“It must be emphasised that these price adjustments will still require a Government subsidy of approximately $840 million in 2022, or half of the total cost of the true market prices of fuel, thus sharing the burden of adjustment more or less equally with the population,” Imbert said.
He said even with these increases, T&T’s fuel prices will remain lower than costs in other Caribbean countries, including Barbados and Jamaica, and lower than the cost of gasoline in the Eastern Caribbean.
“The Cabinet has also agreed that the price increases will take effect on Tuesday, April 19, 2022,” he said.
Imbert said T&T’s fuel consumption per capita was higher than that in many other countries. He said there was no doubt heavily subsidised prices contribute to this pattern of high consumption.
“As the price of oil escalates, therefore, we must strive to change our approach to fuel consumption,” he said.
He said the Government was taking steps to encourage citizens to conserve fuel, including a new exemption for hybrid cars. He said this exemption will take effect between the beginning and middle of May 2022.
“These tax concessions will be designed to cater for typical car owners and will not be available for owners or importers of high-end luxury hybrid cars. For example, a typical hybrid car that will fall into this new category of tax exemption would have an engine size not exceeding 1600 cc, an electric motor generating 45 kW, a total power output in the vicinity of 78 kW and would not be more than three years old,” he said.