Press Release 3 – Oil prices to drop lower; experts say remove fuel subsidy

Updated On: Jan 27th 2015

“Low energy prices are here to stay” and expect the oil price to hover at approximately US$30.00 per barrel rather than the US$60.00 futures prices, Non- Resident Senior Fellow, at the Peterson Institute for International Economics, Professor Avinash Persaud told the Trinidad and Tobago Energy Conference at the Hyatt hotel Monday January 26th.

The financial analysts overestimated the impact that tensions in the Middle East would have on long-term oil prices which quadrupled during the difficult period, said Professor Persaud noting that oil production in countries such as Syria, Iraq and Libya has returned to almost normal.

Other panelists at the forum Reflecting On Energy Market Reform agreed with Professor Persaud on his other major statement that “now is the time for T&T to remove the fuel subsidies; subsidies are like the Chikungunya Virus, they are tenacious and long-lasting.”

Prof. Persaud said subsidies are “inefficient, inequitable and the major benefits go to the rich and impact negatively on the poor and are fraught with corrupt practices.”

He said savings from removing the subsidy can be given in direct transfers to the poor: “remove the subsidy while energy prices are low and target the poor with direct benefits,” Prof. Persaud told the Energy Conference organised by the Energy Chamber.

But lower energy prices should be seen as a “blessing in disguise and should be used to transform the economy”, retired banker, Richard Young told the conference.

In support of the removal of the subsidy, UWI economist, Dr. Roger Hosein bemoaned the fact that “47% of subsidies go to make-work programmes.” He was critical of Prime Minister Kamla Persad-Bissessar’s statement “in which she lost the opportunity to talk about the implications of the falling oil prices.”

On failing state enterprises and the issue of public versus private sector ownership, economist Dr. Terrence Farrell has no intrinsic problem with the principle of state enterprises. “The political leadership has to make sure that the best people are put to run the enterprises and leave them alone; they must understand that they need to stay out of interfering in certain areas of the state sector,” energy being one of them, said Dr. Farrell.

Unfortunately, the state-owned Petrotrin is not proving a good example of an efficient company, said the economist.