In many of the last nine bud­get pre­sen­ta­tions, Fi­nance Min­is­ter Colm Im­bert has paid at­ten­tion to the fu­el sub­sidy.

Over nine fis­cal years, dat­ing back to his first pre­sen­ta­tion in Oc­to­ber 2015, Im­bert has made six ad­just­ments to fu­el prices to re­duce ex­pen­di­ture on the sub­sidy, while al­so out­lin­ing plans last year to cap the sub­sidy at $1 bil­lion:

• In 2016, the price of su­per gaso­line was in­creased from $2.70 by 15 per cent to $3.11. A sim­i­lar per­cent­age in­crease was ap­plied to diesel as it was ad­just­ed from $1.50 to $1.72;

• In 2017, diesel alone in­creased by an­oth­er 15 per cent from $1.98 to $2.30;

• In 2018, su­per gaso­line raised from $3.58 to $3.97 per litre, while diesel was raised again from $2.30 to $3.41 per litre;

• A year lat­er, su­per alone would be ad­just­ed, from $3.97 per litre to $4.97;

• In 2022 there were two ad­just­ments, in April of that year dur­ing the mid-year bud­get re­view, pre­mi­um and su­per gas were raised to $6.75 and $5.97 re­spec­tive­ly with diesel see­ing a 50-cent in­crease to $3.91 per litre;

• In Im­bert’s 2023 bud­get pre­sen­ta­tion, the price of gas would be ad­just­ed for the last time to date with pre­mi­um and su­per prices in­creas­ing by a dol­lar to $7.75 and $6.97 with diesel again in­creas­ing by 50 cents to $4.41.

Around that time, the min­is­ter would al­so state that, in a bid to re­duce gov­ern­ment spend­ing on the fu­el sub­sidy, there would be a cap on the fu­el sub­sidy of $1 bil­lion.

In the Eco­nom­ic Bul­letin for Ju­ly 2024, in a para­graph de­tail­ing gov­ern­ment ex­pen­di­ture for the first 9 months of fis­cal 2024, the Cen­tral Bank stat­ed, “Trans­fers to house­holds fell by $1.2 bil­lion (year-on-year) to $7 bil­lion in the nine months to June 2024, as there were no fu­el sub­si­dies pay­ments com­pared with $1 bil­lion in the pre­vi­ous fis­cal year pe­ri­od.”

This sug­gest­ed that the gov­ern­ment may not have had to con­tribute to the fu­el sub­sidy at all for the cur­rent fis­cal year.

How­ev­er, this ap­peared to be con­trary to En­er­gy Min­is­ter Stu­art Young’s con­tri­bu­tion to a stand­ing fi­nance com­mit­tee fol­low­ing the mid-year bud­get de­bate in June where he said $500 mil­lion had been al­lo­cat­ed to cov­er the sub­sidy in the bud­get with an ad­di­tion­al $571 mil­lion be­ing sought to cov­er the sub­sidy for the rest of the year.

This would sug­gest that once again, the Gov­ern­ment would pay $ 1 bil­lion in fu­el sub­sidy costs for fis­cal 2024.

Young con­firmed in that sit­ting that the Gov­ern­ment had paid $1.67 bil­lion in 2022 for the fu­el sub­sidy while in 2023, it was $1.845 bil­lion.

Since Im­bert’s first bud­get pre­sen­ta­tion the sub­sidy has been $2.1 Bil­lion in 2015, $400.8 mil­lion in 2016. $528.6 mil­lion in 2017, $739 mil­lion in 2018, $276.7 mil­lion in 2019, $86 mil­lion in 2020 and $431 mil­lion in 2021. 

This would mean the gov­ern­ment would have spent about $9 bil­lion on the sub­sidy in 9 years.

From 2006-2016, ag­gre­gate fu­el sub­si­dies amount­ed to $31 bil­lion, ac­cord­ing to a re­port from the Of­fice of the Prime Min­is­ter.

The Busi­ness Guardian reached out to the Cen­tral Bank to clar­i­fy the Ju­ly 2024 Eco­nom­ic Bul­letin’s state­ment con­cern­ing the sub­sidy pay­ment, but did not get a re­sponse up to the time of pub­li­ca­tion.

How­ev­er, en­er­gy econ­o­mist Gre­go­ry McGuire ex­plained that based on pric­ing da­ta and pro­duc­tion lev­els, it was un­like­ly that the sub­sidy would not have been paid by the gov­ern­ment this year.

He in­stead ex­plained that based on es­ti­mates the gov­ern­ment would have to pay $640m to cov­er the sub­sidy for fis­cal 2024.

He al­so ex­plained that a re­duc­tion or ab­sence of pay­ment de­tailed by the Cen­tral Bank may not mean the sub­sidy was not cov­ered.

McGuire said, “It doesn’t nec­es­sar­i­ly mean that that is no sub­sidy. The cost of sub­sidy is shared be­tween the Gov­ern­ment and the E&P (Ex­plo­ration and Pro­duc­tion) com­pa­nies like bpTT, Peren­co, EOG and Shell. All com­pa­nies pro­duc­ing more that 3,500 bbl/day must pay up to 4 per cent of their gross in­come as the pe­tro­le­um levy. That goes to off­set the cost of the fu­el sub­sidy. Gov­ern­ment’s share kicks in if and when the share of the com­pa­nies does not cov­er the sub­sidy ful­ly.”

He al­so felt it was un­like­ly that in­creased use of elec­tric and hy­brid ve­hi­cles had enough of an im­pact on fu­el con­sump­tion and by ex­ten­sion the sub­sidy ex­pen­di­ture.

“In gen­er­al, an in­crease in elec­tric and hy­brid ve­hi­cles would re­sult in a slow­er growth/de­cline in fu­el con­sump­tion. Low­er fu­el con­sump­tion re­sults in a low­er over­all sub­sidy bur­den,” said McGuire.

“How­ev­er, I do not think that the num­ber of EVs and hy­brids on the roads is suf­fi­cient to im­pact the sub­sidy bur­den in this man­ner.”

The econ­o­mist how­ev­er said it was not like­ly an in­di­ca­tor that the price of gas could go down for mo­torists. This he stressed was as a re­sult of the fact that the long-promised lib­er­al­i­sa­tion of fu­el prices, which was sug­gest­ed by Im­bert in 2020, had not yet been im­ple­ment­ed.

In fact, in the fis­cal 2023 bud­get de­bate, Prime Min­is­ter Dr Kei­th Row­ley had even de­tailed how the ad­just­ment could hap­pen stat­ing that based on the cal­cu­la­tions at that time, at an av­er­age price of US$85 a bar­rel for oil, the price of pre­mi­um gaso­line should drop to $6.92.

Su­per would drop to $6.66, if the in­ter­na­tion­al price of oil drops to US$80, pre­mi­um should fall to $6.28 and su­per to $6.05, while an in­ter­na­tion­al fu­el price of US$75 pre­mi­um should see the pre­mi­um price fall to $5.68 and su­per will de­crease to $5.43.

Based on in­for­ma­tion on the sta­tista web­site, the av­er­age price of West Texas In­ter­me­di­ate (WTI) for the pe­ri­od Oc­to­ber 1, 2023, to June 30, 2024, was US$79.27.

How­ev­er, this, and the promise that gas sta­tions would have these prices ad­just­ed month­ly nev­er ma­te­ri­alised.

“The ini­tial pro­pos­al when Gov­ern­ment an­nounced its pol­i­cy po­si­tion on the lib­er­al­i­sa­tion of the fu­els mar­ket was that a mech­a­nism would be put in place so that pump prices would move with in­ter­na­tion­al mar­ket prices.

“This mech­a­nism now pre­vails in Ja­maica and Bar­ba­dos. How­ev­er, it has not yet been in­tro­duced in Trinidad and To­ba­go,” said McGuire, who had long voiced his sup­port for lib­er­al­i­sa­tion to be im­ple­ment­ed as he stressed that fu­el sub­si­dies ben­e­fit the rich more than the poor and lead to poor con­sump­tion pat­terns and dis­tort­ed mar­kets.

Ad­di­tion­al­ly, the sub­sidy is con­trary to glob­al calls for re­duc­tion of car­bon emis­sions, he stat­ed pre­vi­ous­ly.

On Fri­day, WTI closed at US$68.18.

How­ev­er the Prime Min­is­ter al­so ex­plained dur­ing the 2023 bud­get con­tri­bu­tion that a drop in in­ter­na­tion­al en­er­gy prices would al­so have ad­verse ef­fect on Gov­ern­ment rev­enues.

This was proven over the course of the fis­cal year, as low­er-than-ex­pect­ed en­er­gy prices im­pact­ed Gov­ern­ment rev­enues for fis­cal 2024.