Home' Trinidad and Tobago Guardian : October 13th 2014 Contents A24
Guardian www.guardian.co.tt Monday, October 13, 2014
The fuel subsidy is the sacred cow of
T&T politics. Successive governments
have spoken about the need to reform
it, but the political directorate has tip-
toed around reform, rather than grab it
by the horns.
The result is an out-of-control $6 bil-
lion per year subsidy that is a drain on
Historically oil prices have risen by
three per cent per year, so the cost of
maintaining the subsidy will only go up.
Implemented in 1974 as the Petroleum
Production Levy and Subsidy Act it was
meant to insulate consumers from fuel
price rises and as a way to spread the
oil wealth. Originally it was conceived as
a three per cent levy on the gross
income of oil companies, with the gov-
ernment picking up the excess cost. In
2003 it was amended to a four per cent
levy on oil companies, excluding those
that produce less than 3,500 barrels per
The fuel-subsidy discussion is one
governed by fear. The public fears losing
what is often felt to be the one benefit
they receive from the national oil wind-
fall. They are fearful that the policymak-
ers do not have the capacity, or intent,
to phase out the subsidy in a painless,
The political directorate is fearful of
an electoral backlash in case fuel subsidy
reform is badly planned and executed. It
is not an unreasonable fear, since no
government has been serious about
implementing a meaningful transport
policy, which must go hand in hand
with reform. Better yet, it should pre-
"The past" and "fear" are not good
places to start a discussion about what
needs to be done for the future. Bold
energy and transportation leadership is
The reason for keeping the fuel sub-
sidy in place is that it insulates the con-
sumer from the free-market price of
fuel. But this comes at a cost.
Ten reasons to do away with the fuel
1) The fuel subsidy is bad for public
finances: The subsidy has become a
millstone around the neck of the coun-
try s finances. It has ballooned to about
ten per cent of the national budget. It
gobbles up a bigger slice of the cake
than education, health or national secu-
2) The fuel subsidy finances organised
The subsidy has created a black mar-
ket for illegally exported diesel. Since
the government "crack-down" on illegal
diesel bunkering, the sale of subsidised
diesel has decreased by $1.5 billion (since
2010). The huge profitability of this
trade, and the low detection rate of
crime in T&T, make it unlikely that this
trade has ceased. Some folks are becom-
ing billionaires in the process.
3) Fuel subsidies are bad for the envi-
ronment: Artificially low prices discour-
age the purchase of fuel-efficient, hybrid
or electric vehicles with reduced CO2
4) Fuel subsidies benefit the wealthy
more than the poor: No local studies
have been done, but internationally it
has been found that the poorest 20 per
cent of society receives only about six
per cent of fuel subsidies. The wealthi-
est 20 per cent receives nearly 40 per
cent. In effect the poor pay for the rich.
5) Fuel subsidies are undemocratic.
The only way to access the fuel subsidy
is by buying fuel. The more you buy,
the more you are rewarded.
6) Fuel subsidies are bad for the bal-
ance of payments: encouraging the
wasteful domestic consumption of fuel
reduces T&T s export of fossil fuels, the
main revenue earner.
7) Fuel subsidies give T&T companies
an unfair trading advantage within Cari-
com: Caricom partners complain that
T&T s fuel subsidies give T&T firms an
unfair trading advantage. The result is
less economic growth and spending
power in the biggest market for T&T s
manufactured (non-oil and gas) goods.
8) Fuel subsidies cause more traffic:
Cheap fuel encourages car ownership
and more miles travelled by motor vehi-
cles. There are 700,000 vehicles regis-
tered in T&T, leading to mass traffic
congestion. Public transport is discour-
9) Fuel subsidies are bad for the oil
I never thought I would write any-
thing promoting the financial health of
fossil-fuel companies, but oil companies,
including Petrotrin, are levied at four
per cent of gross income to pay for the
subsidy. Reviewing the history of main-
tenance-related Petrotrin oil spills, that
four per cent could be far better spent
on HSE and maintaining aging infra-
10) Fuel subsidies are unsustainable.
What happens when T&T runs out of
oil and gas?
T&T will exhaust its natural gas and
oil one day. When exactly is open to
interpretation but it will probably be
within 20-40 years.
T&T can either plan a phased trans-
formation of its fuel subsidy, or be
forced to do so by a future economic
shock when the last oil or gas molecule
has been extracted.
FUEL SUBSIDY REFORM NEEDED
MARC DE VERTEUIL
What an embarrassment!
Just imagine the young female foot-
ballers from this country, preparing for an
International tournament, left without the
necessary funding, be it from the Sports
Ministry or their parent organisation.
T&T&T is an oil-rich nation and should
take more pride in its sportsmen and
women at all times when they are repre-
senting their country in sporting events in-
ternationally. The coach should never have
to beg for help... what a disgrace.
The man in charge of football, Mr Ray-
mond Tim Kee, should never have allowed
this to happen.
No excuses are good enough for me.
What a shame.
Kelvin La Roche
T&T take proactive steps
to prevent Ebola
It is just a matter of time before Ebola
arrives in Trinidad if we continue to be re-
active and not proactive.
My suggestion is that we immediately
institute a ban for people wanting to travel
to West Africa and also ban people from
West Africa wanting to visit T&T.
We also need to install thermal scanners
at our points of entry.
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