In de­liv­er­ing the bud­get for fis­cal 2021 on Oc­to­ber 5, 2020, Min­is­ter of Fi­nance, Colm Im­bert, said that at the pre­vail­ing in­ter­na­tion­al oil prices, “sub­si­dies do not arise in the sale of pre­mi­um gaso­line or su­per gaso­line; but they con­tin­ue to pre­vail in the sale of diesel, kerosene and LPG.”

As a re­sult of sub­si­dies not aris­ing on the sale of pre­mi­um or su­per gaso­line at the then pre­vail­ing prices for those com­modi­ties, Mr Im­bert said, “We are of the view that in the con­text of the pro­ject­ed in­ter­na­tion­al oil prices, the fu­el mar­ket should be lib­er­alised.”

He an­nounced the lib­er­al­i­sa­tion of the fu­el mar­ket al­most sev­en months af­ter the on­set of the COVID-19 pan­dem­ic in T&T, at a time when the pre­vail­ing price of a bar­rel of crude oil was about US$40 a bar­rel and in the con­text of his pro­jec­tion of a fis­cal deficit for the 2021 fis­cal year of $8.20 bil­lion or 5.6 per cent of GDP.

In oth­er words, T&T’s min­is­ter of fi­nance pro­posed the lib­er­al­i­sa­tion of the fu­el mar­ket at a time of sig­nif­i­cant fis­cal dif­fi­cul­ty and in the con­text of the Gov­ern­ment de­cid­ing to peg the 2021 bud­get at an oil price of US$45 a bar­rel and a nat­ur­al gas price of US$3 per MMB­tu.

What was the Cab­i­net’s vi­sion for what a lib­er­alised T&T fu­el mar­ket would look like?

Mr Im­bert out­lined the vi­sion in his 2021 bud­get pre­sen­ta­tion:

“Un­der this arrange­ment, which is tar­get­ed for in­tro­duc­tion in Jan­u­ary 2021, the fixed re­tail mar­gins for all liq­uid pe­tro­le­um prod­ucts will be re­moved. Pe­tro­le­um re­tail­ers and deal­ers will now be al­lowed to fix their own mar­gins.

“Whole­sale mar­gins will re­main fixed for the time be­ing and an ap­pro­pri­ate but rea­son­able tax in­tro­duced to com­pen­sate for the cur­rent fu­el sur­plus that is gen­er­at­ed on the sale of gaso­line, be­cause of de­pressed oil prices.

“The net re­sult should be lit­tle or no in­crease in the price of mo­tor fu­els at cur­rent oil prices. How­ev­er, it must be not­ed that if the price of oil re­cov­ers, the price of gaso­line and diesel will nat­u­ral­ly in­crease pro­por­tion­ate­ly.

“Madam Speak­er, the new trad­ing arrange­ments be­tween the im­porter of fu­el pe­tro­le­um prod­ucts and the whole­salers would re­sult in price ad­just­ments for such prod­ucts up or down based on changes in Unit­ed States Gulf Coast prod­uct prices ob­tained from the Platts Oil­gram Price Re­port, which is re­flec­tive of in­ter­na­tion­al mar­ket prod­uct prices.

“For trans­paren­cy pur­pos­es, the Min­istry of En­er­gy and En­er­gy In­dus­tries will post the changes in the re­fin­ery prices of pre­mi­um gaso­line, su­per gaso­line, diesel and kerosene on the first day of each month, ex­cept for the pro­duc­tion price of liq­uid pe­tro­le­um gas (LPG) which will re­main un­der the sub­sidy mech­a­nism.”

There are sev­er­al as­pects of Mr Im­bert’s quote above that are note­wor­thy:

• Re­moval of fixed re­tail mar­gins;

• Main­te­nance of whole­sale mar­gins, for the time be­ing;

• In­tro­duc­tion of an ap­pro­pri­ate but rea­son­able tax on fu­el; and

• Lit­tle or no in­crease in fu­el prices at the price of crude oil of be­tween US$40 and US$45 a bar­rel.

Giv­en that our Min­is­ter of Fi­nance en­vis­aged the in­tro­duc­tion of the lib­er­al­i­sa­tion of the fu­el mar­ket in Jan­u­ary 2021, what caused the de­lay?

In his pre­sen­ta­tion of the 2022 bud­get, on Oc­to­ber 4, 2021, Mr Im­bert said the Gov­ern­ment had de­signed “a cred­i­ble and re­li­able pric­ing sys­tem for fu­els with­in which the fu­el mar­ket could be fi­nal­ly lib­er­alised.” That sys­tem re­flect­ed the com­mit­ment he made in the 2021 bud­get de­liv­ered one year ear­li­er.

He then out­lined the frame­work of the lib­er­alised fu­el mar­ket, which he had sketched in the pre­vi­ous bud­get.

From what I can de­ter­mine, the frame­work in the 2022 bud­get had some use­ful clar­i­fi­ca­tions:

1) The tax on fu­el would on­ly ap­ply when oil prices were de­pressed;

2) The Min­istry of En­er­gy would post the mar­ket-based whole­sale prices of pre­mi­um and su­per gaso­line and diesel on the first day of every month, but not the price of kerosene and LPG (cook­ing gas), which would re­main un­der the sub­sidy mech­a­nism. This added kerosene to cook­ing gas as com­modi­ties to re­main sub­sidised; and

3) The Gov­ern­ment would set a re­tail mar­gin ceil­ing for each pe­tro­le­um prod­uct to min­imise price fluc­tu­a­tions and pro­tect the end con­sumers of pre­mi­um gaso­line, su­per gaso­line and diesel.

Mr Im­bert made the point that in the year be­tween his de­liv­ery of the 2021 and 2022 bud­gets, the leg­isla­tive amend­ments to the Pe­tro­le­um Act and the Pe­tro­le­um Pro­duc­tion Levy and Sub­sidy Act re­quired to im­ple­ment the lib­er­al­i­sa­tion of the fu­els mar­ket, were fi­nalised in the Fi­nance Act 2021. That leg­is­la­tion was as­sent­ed to on Ju­ly 14, 2021.

“We are now com­plet­ing the de­sign of the in­fra­struc­ture with­in which the com­mence­ment of the lib­er­al­i­sa­tion of fu­el prices could be ini­ti­at­ed, with due re­gard to the im­pact of fu­el prices on the most vul­ner­a­ble in so­ci­ety,” he said in his 2022 bud­get pre­sen­ta­tion, adding lat­er in the speech, “We are phas­ing out the sub­sidised con­sump­tion of fu­els, with ap­pro­pri­ate safe­guards for the vul­ner­a­ble groups. We are putting in place a pric­ing re­form agen­da that would lead to en­hanced en­er­gy ef­fi­cien­cy with sig­nif­i­cant fis­cal ben­e­fits.”

On the is­sue of the ap­pro­pri­ate safe­guards for vul­ner­a­ble groups, Mr Im­bert said when the fu­el mar­ket is lib­er­alised “a fu­el cash card will be made avail­able to vul­ner­a­ble groups to off­set the cost of in­creas­es in the price of mo­tor fu­els. This cash card pro­gramme will be ad­min­is­tered by the Min­istry of Pub­lic Util­i­ties.”

He said the fu­el cash card pro­gramme would be sim­i­lar to the util­i­ty cash card “which will be made avail­able to low-in­come and vul­ner­a­ble groups to ac­cess sub­si­dies for elec­tric­i­ty and wa­ter, once the prices for these ser­vices are reg­u­larised.”

In the 2023 bud­get pre­sen­ta­tion, Mr Im­bert ex­plained the Gov­ern­ment’s fail­ure to im­ple­ment the lib­er­al­i­sa­tion of the fu­el mar­ket by stat­ing,”The un­ex­pect­ed 100 per cent in­crease in oil prices from 2021 to 2022 frus­trat­ed our pol­i­cy ob­jec­tive to lib­er­alise in 2022 the fu­el mar­ket with­in which a stan­dard­ised pric­ing sys­tem for mo­tor fu­els could have been es­tab­lished.

“In 2021, we had de­ferred to the first quar­ter of 2022 the procla­ma­tion of the leg­isla­tive amend­ments to ef­fect lib­er­al­i­sa­tion of the fu­els mar­ket.”

In his 2023 bud­get pre­sen­ta­tion, de­liv­ered on Sep­tem­ber 26, 2022, the min­is­ter of fi­nance pro­vid­ed some very use­ful in­for­ma­tion. He said that at an oil price of US$90 per bar­rel, the un­sub­sidised price would be $7.30 per litre for pre­mi­um gaso­line, $7.23 per litre for su­per gaso­line and $7.38 per litre for diesel, and at that oil price, the cost to Gov­ern­ment if the cur­rent prices are left un­changed would be $1.9 bil­lion.

That was the bud­get speech in which Mr Im­bert an­nounced a sec­ond in­crease in fu­el prices for the 2023 fis­cal year:

• Pre­mi­um gaso­line was in­creased to $7.75 a litre (with the un­sub­sidised price, based on a US$90 a bar­rel crude oil price, be­ing $7.30);

• Su­per gaso­line was in­creased to $6.97 a litre (with the un­sub­sidised price, based on a US$90 a bar­rel crude oil price, be­ing $7.23);

• Diesel was in­creased to $4.41 a litre (with the un­sub­sidised price, based on a US$90 a bar­rel crude oil price, be­ing $7.38); and

• Kerosene was in­creased to $4.50 a litre (he did not give the un­sub­sidised price of this com­mod­i­ty).

If at a crude oil price of US$90 a bar­rel at the end of Sep­tem­ber 2022, the un­sub­sidised price of pre­mi­um and su­per gaso­line was $7.30 and $7.23 re­spec­tive­ly, it sure­ly stands to rea­son that at a cur­rent crude oil price of US$75 a bar­rel, the pump prices of those fu­els in T&T are NOT be­ing sub­sidised.

There is ab­solute­ly no rea­son, there­fore, why the sale of pre­mi­um and su­per gaso­line can­not be lib­er­alised and low­ered to prices that re­flect the cur­rent re­al­i­ties of glob­al crude oil prices. That would leave diesel as the on­ly one of the three main fu­els at­tract­ing a sub­sidy.

Ac­cord­ing to the 2024 Re­view of the Econ­o­my, the short­fall in sub­si­dies re­lat­ing to the sale of pe­tro­le­um prod­ucts amount­ed to $470 mil­lion. One sus­pects that all of that is re­lat­ed to diesel.

Low­er­ing the price of gaso­line would demon­strate to T&T that Mr Im­bert cares about peo­ple.