2008: The year of oil price record highs and lows
PORT SPAIN
Trinidad & Tobago Express
Petroleumworldtt.com
12 31 08
Of all the economic stories that occupied the attention of people in this country and across the world for the year, none was more gripping than the dramatic plunge of global oil prices since they hit a record average high of US$147.27 per barrel on July 11.
Since that date, oil prices have plummeted below US$40 per barrel.
The story that has unfolded in the international commodity markets concerning the global oil price plunge caught the attention of much of the country on a daily basis since oil has been one of this country's main revenue earners, only second to Liquefied Natural Gas (LNG).
And this country has not escaped the impact of the plummeting oil prices since the Government had to readjust the record $49 billion 2008/2009 Budget less than three months after Finance Minister Karen Nunez-Tesheira presented the fiscal package to the Parliament.
Standing in the face of a decline
When Nunez-Tesheira delivered the Budget presentation on September 22, the price of oil had declined from its record peak of US$147.27 per barrel in July to US$100 per barrel.
That same day, Nunez-Tesheira announced that an increase in the price of premium gasoline from $3 per litre to $4 per litre - a move that has significantly affected the pockets of many vehicle owners and one that the Government does not intend to rescind even in the face of falling gas prices.
Energy Minister Conrad Enill said even though it is costing the State less to fund the subsidy for fuel, the cost of the State-owned refinery have not become any lower.
The Prime Minister Patrick Manning administration based the 2008/2009 Budget on an oil price of US$70 per barrel and a natural gas price of US$4 per million British thermal units (mmbtu).
This marked an increase of US$20 per barrel and US$1 per mmbtu over the US$50 per barrel and US$3 per mmbtu prices used to calculate the 2007/2008 Budget.
Legitimate concern or
irrational commentary
Manning, Nunez-Tesheira and other Cabinet members had defended the decision to base the Budget on the US$70 per barrel oil price for several weeks after it was presented to the Parliament even as oil prices continued to fall.
On October 16, Works and Transport Minister Colm Imbert told reporters at the post-Cabinet news conference at the Diplomatic Centre in St Ann's that the situation did not pose a "doomsday scenario" for the local economy.
Imbert did so in response to a question from the Express posed to Minister in the Ministry of Finance Mariano Browne about the ability of the $12 Heritage and Stabilisation Fund (HSF) to help keep the country afloat if it experiences a major economic crisis in light of the instability of global oil prices and the international financial markets.
Imbert criticised those who raised any concerns that the Treasury would run dry during the next fiscal year.
"I find that the tone of the conversation in Trinidad and Tobago is highly irrational and that some of the commentary we are getting from people who know better is hysterical," Imbert said.
Browne, who had first responded to the question, said, "You are asking me a hypothetical question which is not on the table and which is not being considered. We are saying that the Budget numbers are strong... To start speaking about withdrawals from the HSF and so on is out to sea right now."
Fast forward to November 29, the day the Express exclusively reported as its lead story comments from Nunez-Tesheira that the Government "got it wrong" when it based the 2008/2009 Budget on an oil price of US$70
per barrel as she noted that several other energy-sector based economies also made similar judgements using the same economic data.
Nunez-Tesheira even recalled that Opposition Siparia MP Kamla Persad-Bissessar, who presented the Opposition party's response to the 2008/2009 Budget, had suggested an oil price of US$68 per barrel for the fiscal package.
"So did the Opposition get it wrong? They got it wrong. Did we get it wrong? We got it wrong. Did Iraq get it wrong? Yes. Did Indonesia get it wrong? Yes. Did Venezuela get it wrong? Yes. That's what you must say," Nunez-Tesheira said.
Getting it right
The Finance Minister said the Government relies on information from the International Monetary Fund (IMF) and the multinational oil and gas companies that operate in Trinidad and Tobago such as bpTT, Repsol and British Gas as well as assistance from the Central Bank.
"The (Finance Ministry's) Budget Division is constantly doing the monitoring and assistance and getting the data all the time, and the information that we had going in on September 22nd came from the IMF, came from OPEC, came from the budget price of the (oil and gas) companies doing business in our country," Nunez-Tesheira said.
She made the comments to the Express just two days before Manning delivered his second address to the nation on the international financial crisis on November 30, when he announced the Budget had been cut to address an anticipated $5.3 billion shortfall for fiscal 2009.
Manning, however, did not announce the new oil and gas price on which the Budget adjustments had been based.
Keeping it within budget
It was Nunez-Tesheira who made the disclosure on the CNC3 prime time news programme "The Big Story" on the night of December 1, before revealing it to the Express the following day.
Both Nunez-Tesheira and Energy Minister Conrad Enill told the Express on December 3, that the new natural gas prices for the Budget were US$3.25 and US$3.50 - a strategy meant to ensure that the Government's expenditure remain unaffected if natural gas prices continued its slight decline into 2009.
And it is the price of LNG that Manning, Nunez-Tesheira and Enill have all insisted that should be the main focus of the nation's attention since LNG sales account for more than 60 per cent of the nation's revenue, not oil.
Manning told reporters during a post-Cabinet news conference on December 13 that the price of natural gas has seen much less instability than that of oil.
He did so on the same day he announced that his doctors in Cuba had discovered a malignant tumour in his left kidney that had to be removed.
Manning had successfully undergone the surgery to remove the cancerous tumour in Cuba last week Wednesday and when he returns to this country early in the new year, he and his administration will still be facing the continuing saga of the rise and fall of oil and gas prices.
Story by Juhel Browne from Trinidad & Tobago Express
-jbrowne@trinidadexpress.com
Trinidad & Tobago Express
Wednesday, December 31st 2008
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