IN his first address to the nation since taking office in September, Trinidad and Tobago Prime Minister Dr Keith Rowley announced a number of economic belt-tightening measures, including a seven per cent across-the-board cut in government expenditure, made necessary by the continuing fall in oil and gas prices. Oil revenues amount to about TT$20 billion, or one third of total national revenue, and in June 2014, the price of West Texas Intermediate (WTI), Trinidad’s benchmark crude oil, was US$106 per barrel. In December 2014, it had declined to US$59 and it is now in the region of US$36 per barrel, Dr Rowley noted.

“You may recall that the 2015 budget was prepared on an anticipated oil price of US$80/barrel. As the oil price continued its relentless downward slide, we were told early in the year that there was a new budgetary horizon based on downward adjustment to US$45/ barrel. This never happened, but expenditure remained as if the revenue flows were coming in as originally planned,” he said.

“You will also recall that the incoming new government based the current 2016 Budget on an oil price of US$45 per barrel, in October. Today the price of oil is hovering around US$36.00/barrel,” he added.

Dr Rowley failed to mention, however, that his People’s National Movement (PNM) manifesto promises ahead of the September 7 general election were also based on an oil price of US$80 per barrel, despite clear signs that this was never going to be realised in practice.

Similarly, the price of liquified natural gas (LNG) in the Japanese market declined from US$16.40/ mmbtu in June 2014 to US$15.70/mmbtu in December 2014 and is now around US$9.00/mmbtu.

LNG prices have declined by similar percentages amounts in European and South American markets. Even in the United States, where natural gas prices had been lower than in other markets, those prices have since fallen even further.

The Henry Hub benchmark price is now about US$1.90/mmbtu compared to US$2.75/mmbtu that was used in the 2016 Budget, just two months ago. (Caribbean News Now)