Economist Dr Ronald Ramkissoon said when T&T governments are pegging the budget against the price of oil and natural gas they should use an average rather than using the lowest or highest prices.
"Prices have been falling and to say where they will stop, I think we are getting to the bottom. It is a bit surprising at the levels to which prices have fallen of both oil and gas. We know the commodities market are very unstable.
We are never sure of how low they will fall or how high they can go.
However, the lower they go, when they do rise it is likely to be higher than we think. That is why policy makers must find an average in making decisions.
So you do not base policy on the lowest price or on the highest but you try to find an average price to work with," he told the Guardian yesterday.
Yesterday, natural gas prices in the US maintained their downward trajectory due to weak demand for the heating because of unseasonably warm temperatures in the United States.
Prices fell sharply by 9 cents, or by 4.5 per cent to US$1.81 per mmbtu (British Thermal Units in million).
Finance Minister Colm Imbert had pegged the T&T budget on a mix of natural gas prices of US$2.75 per mmbtu (Henry Hub) and US$8 per mmbtu (Indonesia).
The news was not better as West Texas Intermediate (WTI) closed at US$36.74 a barrel, well below the budget peg of US$45.
Ramkissoon said T&T is in a difficult situation and that the country should have addressed the problem at least one year ago.
"We need to address the fact that we are in a very different environment and we need to address it at the company level, at the individual level, at the country level and do what is required to ensure that in the short term we ride out difficult times," he said.
He said the Government must use this period of low energy prices to devise a strategy for growth for the future so that when prices do go back up the country will have other sources of revenue and the economy will be more diversified.
He said the economy has been structured in a particular way for decades and it will take time before certain values are changed and people modify their habits.
Referring to disclosures made by the Central Bank Governor, Ramkissoon said while the country was surprised by the type of companies that have absorbed the foreign exchange, economists who have studied the T&T economy were not surprised that retail-type companies use a large chunk of the foreign exchange.
"It is no news that the economy is skewed in particular way in terms of consumption. It is no news that retail and distribution is very large and vibrant and has been that way for decades.
It is no news where most of the foreign exchange goes. That is no news for economists. We knew that 90 per cent of our foreign exchange came from one sector.
We know that the rest of the economy is net foreign exchange users.
We know that there is an emphasis on consumption rather than investment and that is T&T's culture," he said.
He said the challenge is to change that balance and move to an economy where the country produces more of what it consumes.