Home' Trinidad and Tobago Guardian : July 30th 2015 Contents Last week Thursday, in the
daily business pages, the
T&T Guardian published an
article about the fact that
the United Arab Emirates
had taken a decision to
remove the subsidies on
transport fuels, by pegging
the prices of gasoline and diesel sold in the country
to global benchmarks.
The AP report indicated that the price of
a litre of premium unleaded gasoline was
US$0.47, compared with the average price in
the US of US$0.84 a litre, the price in Saudi
Arabia of US$0.16 and the price in T&T of
US$0.90 in T&T, (which would have been
added into the story by the business news
editor on duty.)
In the story, the UAE s Ministry of Energy
was reported as saying that the price changes
would take effect from August 1 and that the
prices of gasoline and diesel would be
announced on the 28th day of each month.
On Tuesday July 28, the Guardian published
the follow-up article, which reported that the cost
of a litre of regular gasoline would increase by
24 per cent and that from Saturday, Emiratis
would pay the equivalent of US$0.58 for a
litre of premium unleaded gasoline at the
pump, up from US$0.47.
That report, which was published in the
Guardian yesterday, contextualised the decision
by the UAE government as being part of a
wider strategy to phase out subsidies and
offset the effect of a drop in revenues. And
it quoted the Moody s rating agency as saying
that it expects the UAE s consolidated revenues
to drop 27 percent this year due to lower global
Now that reporting obviously led to ques-
tioning along the lines of if an energy-dom-
inated economy as wealthy as the UAE could
take the decision to cut fuel subsidies, is it
inevitable that an energy-dominated but less
wealthy country like T&T would have to do
the same in the near future.
The UAE, of course, is a country located in
the Arabian Peninsula and on the Persian Gulf,
with a population estimated to total 9.2 million,
of which 1.4 million are Emirati citizens and
7.8 million are expatriates.
Wikipedia states that the UAE has a gross
domestic product of US$570 billion and a GDP
per capita of US$63,181.
T&T s gross domestic product is about
US$28 billion and our GDP per capita is about
That means that UAE nationals are, on aver-
age three times wealthier than T&T. Wikipedia
also indicates that 4 per cent of the T&T pop-
ulation lives below the internationally accepted
poverty line of US$1.25 a day, while in the
UAE that number is zero.
The consensus here is that the Minister of
Finance who decides to remove fuel subsidies
in T&T risks stoking social unrest and political
That is because, I think, that the politicians
in this country---and that is all politicians---
have completely bought into the myth that
the majority of people living in this country
believe that cheap fuel is part of the birthright
of being a Trinbagonian or living here.
This must mean that politicians believe that
the people they govern---or hope to govern---
are unsophisticated economically and only
think of their own interests and, perhaps, the
interests of their families.
The fact is that T&T spends too much
money on fuel subsidies.
The 2015 Estimates of Expenditure, which
is part of the package of the budget documents,
reveals that the shortfall in subsidy for petro-
leum products amounted to $4.45 billion in
2013, the revised estimate for 2014 was $7
billion and the preliminary estimate for 2015
is $6 billion---although this number is likely
to be reduced because of lower global oil prices.
The fuel subsidy accounted for 8 per cent
of total recurrent expenditure in 2013, 11.5 per
cent in 2014 and 9.5 per cent in 2015.
The $17.5 billion that has been spent or allo-
cated to be spent for the three years 2013 to
2015 money could be better directed in other
areas, including in providing targetted fuel
subsidies to families who are really needy---
the estimated 4 per cent of the population
who are living below the poverty line.
The International Monetary Fund (IMF), in
a major study on energy subsidies published
in May said that energy subsidies are projected
at US$5.3 trillion in 2015, or 6.5 per cent of
The study estimates that the total annual
post-tax energy subsidy in T&T in 2013 was
US$3.96 billion or 14.29 per cent of GDP.
In its staff report for the 2014 Article IV
consultation with T&T, the IMF identified
fuel subsidies as one of this country s key
issues and advised: "Fuel subsidies need to be
Under recent developments, the IMF staff
The institution noted that fuel subsidy
arrears to the state-owned energy company
Petrotrin were estimated at 3.0 percent of
GDP by the end of FY 2012/13.
Additional cash has been appropriated for
petroleum subsidies in FY 2013/14 (totaling
some 3.75 per cent of GDP), both to finance
ongoing subsidies and reducing arrears, which
are expected to be eliminated by the fiscal
year s end.
What s more, the IMF staff recommended
"quickly moving to start ending fuel subsidies.
Cheap fuels induce excessive reliance on auto-
mobiles, leading to efficiency-killing traffic
jams and environmental costs, and dispro-
portionately benefit the well-off." The staff
report noted that the Government prefers to
first make compressed natural gas (CNG) wide-
ly available as a substitute for gasoline and
diesel, while encouraging conversion of vehicles
to CNG use, before removing fuel subsidies.
"Staff noted, however, that concurrent
reduction of fuel subsidies would boost incen-
tives to switch to CNG."
In noting that the diversification of the T&T
economy would require reorienting government
expenditure towards supporting investment
in the non-energy sector, the IMF stated:
Even the IMF directors got involved in advis-
ing the T&T government on the appropriate
course of action to take.
In conclusion, the UAE s Energy Minister
Suhail al-Marzouei said it best in justifying
his government s decision to scrap the fuel
"Everyone drives a car even if they cannot
afford to drive a car. We cannot ask the gov-
ernment to subsidize those people when they
shouldn t drive cars," al-Marzouei said.
JULY 30 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
Telephone: 225-4465, ext 2035, 2025
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PO Box 122.
Is scrapping the
fuel subsidy inevitable?
Cars pass by the city skyline with the Burj Khalifa, world tallest
tower in background, Tuesday, July 28, 2015, in Dubai, United Arab
Emirates. The United Arab Emirates has slashed gasoline subsidies,
announcing Tuesday that it will raise the cost of a litre of regular
gasoline by 24 percent amid globally low oil prices that have cut into
the country's revenues.
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