Experts cautious on oil output cut

“If it’s true that’s very good news but I would hesitate to get excited about it,” energy economist Gregory Maguire told Newsday yesterday.

“OPEC to me is reacting to the fact that supply—at 97 million barrels of oil per day— is really running ahead of demand for far too long. Demand—at 96 million barrels of oil per day— has not picked up as expected,” former Energy Minister Kevin Ramnarine said. The cuts would possibly bring balance to the oversupplied oil market and help stabilize volatile prices, Maguire said, but Trinidad & Tobago needs to learn to live without surpluses of oil and gas.

Noting that the news comes just before the National Budget is to be presented on Friday, he said the country needs to learn to live within its mean and not just on the expectation that oil and gas prices will go up. Energy Minister Nicole Olliviere was conservative in her response: “Our oil revenues are computed using quarterly averages, not daily, so if the price holds for three months, then it would have a positive effect.” Chairman of the Trinidad and Tobago Energy Chamber agreed that while there was not a whole lot of detail, the fact that OPEC has made these cuts— the first since 2008—is “historic, unique and very interesting.

It’s the early days yet so let’s see how it plays out. OPEC needs to hold to these cuts; if it works as intended then it will be a benefit to the market and beneficial to T&T’s economy,” he said.

Ramnarine said while it was good news for oil-producing countries, there was one sub group in Trinidad that he noted might rather the lower prices.

Small producers on land, he noted, would feel definite pinch since all lease holders operating in Trinidad & Tobago have to pay the Supplemental Petroleum Tax when oil prices go over US$50/barrel.

Operators on land have to pay 18 percent in taxes, while offshore producers have to pay 33 percent, “so it’s worse for them when prices go up,” Ramnarine said. While the government would at least have some extra revenue to look forward to should oil prices rise, Ramnarine predicted that Finance Minster Colm Imbert might choose to peg the Budget on oil prices between US$45 and US$48 per barrel.

(See Page 16A)