Opinion
- Editorial- Commentary
Newsday:
US $100/barrel oil price
Last week’s surge in crude
oil prices on the futures market to a record US$100
a barrel high will
trigger both positives and negatives for the Trinidad
and Tobago economy and should not be considered merely
in the somewhat narrow context of increased Government
revenue.
Instead, what should be clearly
understood is that even as it presents a potential
growth in Government
receipts, with specific emphasis on expanded foreign
exchange earnings, imported inflation will rise because
of increased costs to the country’s foreign suppliers.
In turn, resulting from this, there will be an assault
on Trinidad and Tobago’s foreign exchange reserves.
Additionally, since domestic
business markups are not likely to go down, consumers,
ultimately, will
be adversely affected as they will be called upon to
pay the additional costs of the goods and services.
The reality is that while the strengthening of crude
prices on the international market adds value to the
country’s petroleum industry, State revenue and
the Revenue Stabilisation Fund, all of them critically
important, what should not be ignored is that in its
wake is the tacit erosion of salaries and wages.
What has to be factored into the equation is that
Government, because it is committed to the faciitating
of expanded oil exploration, in light of rapidly dwindling
known crude oil reserves, has had to increase allowances
to multinational oil companies operating here in an
effort to encourage this needed exploration activity.
This, particularly, as newly discovered as well as
potential reserves are in areas of very deep water.
Overall, the exploration, which all too often ends
in oil not being found in commercial quantities has
proven to be very expensive, running into hundreds
of millions of dollars.
Meanwhile, even as higher prices
for crude oil impact, negatively on the landed cost
of our imports, it also
increases “the cost of finished products,” as
Energy Minister, Senator Conrad Enill, has pointed
out. When this takes place it will make our products
less competitive, not only in the international and
regional market place, but even on domestic shelves
as well.
And with the international demand for crude, spurred
in particular by a literal explosion of production
in such countries as China and India, in excess of
supplies today, the possibility of a three figure crude
oil price becoming a fixed part of the energy landscape
is uncomfortably real.
If this country is to compete effectively in a constantly
evolving market situation, triggered by crude oil demand
surpassing supplies, then productivity will have to
outstrip labour, management and other on the job costs.
Increased revenue from crude should not be used to
subsidise and mask inefficiency, for when our crude
and natural gas deposits run out the country might
not be prepared to meet the varied challenges that
lie ahead.
NewsDay
is one of Trinidad & Tobago newspapers. Petroleumworld
does not necessarily share these views.
This
commentary was originally published by Trinidad Newsday,
on 01/10/2007. Petroleumworld reprint this article
in the interest of our readers. Petroleumworld does
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News 01/20/08
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