Falling oil prices put the Government in a difficult situation, economist Dr Ronald Ramkissoon said yesterday. Commenting on the decision by OPEC not to reduce output, he said: "An oil economy must not operate in deficit for any length of time. “T&T has been running a deficit for about four years. We now need to deal with this in light of below average oil prices. “Government needs to look at where on the expenditure side they need to cut. The first area they would need to look at is transfers and subsidies like fuel prices. Whether the Government wants to do it or not is up to them.”
OPEC took no action to ease a global oil-supply glut, resisting calls from Venezuela that the group needs to stem the rout in prices. The group maintained its collective production ceiling of 30 million barrels a day, Ali Al-Naimi, Saudi Arabia’s oil minister said after the 12 nations met in Vienna. Futures slumped the most in more than three years.
Ramkissoon said economists always cautioned economies like T&T, which was oil-based, not to depend on fluctuation in international markets. He added: "It seems that T&T will be in a scenario of low oil prices for a while. What is a while is left to be seen. “If oil prices were to increase because of geo-politics, or some other reason, it means later on in the fiscal year we can have prices at an average of US$80 a barrel or higher. The fact is it has been at an average in the US$70 and over for a few weeks. It has not been like that for an entire fiscal year."
Ramkissoon said T&T still was not in the same position it was during the 1980s when the country experienced a recession due to a fall in world oil prices. "I do not know if that situation is before us now, as T&T has the Heritage and Stabilisation Fund (HSF)," he said. Still, he said, T&T would continue to have problems if the economy was not diversified. "Successive administrations have sought to shield the population from the reality. The consequence is a significant part of the population depends on government largesse and an economy that is not diversified," he said.
Dr Roger Hosein, University of the West Indies (UWI) economist, described the decline in oil prices as "sharp." Despite that, Hosein said prospects for the economy were not dim as there had already been a margin of recovery in last few days and it may be sustained during the winter. He added: "We are not in a predicament of unmanageable magnitude but it points in the direction of the Government having a Plan B as to where it can cut some of its planned spending for the fiscal year. “Again, however, as we have been arguing variously for many decades, the sustained solution lies in diversifying the productive base away from its mono crop structure."