Prime Minister Dr Keith Rowley

Country’s fuel consumption has to go down: Prime Minister Dr Keith Rowley speaks during “Conversations with the Prime Minister” on Tuesday evening at the Bon Air West community facility.

Brace for higher fuel prices.

Prime Minister Dr Keith Rowley has put the population on notice that the Government cannot insulate it “completely” from price spikes which are currently affecting the oil industry.

Addressing a “Conversations with the Prime Minister” session at the Bon Air West community facility on Tuesday night, he said contrary to the assumptions of many in the population, the country stood to lose, not gain, from high oil prices because its production levels were too low.

The Prime Minister noted that the current oil price (as of Tuesday) was US$128 a barrel.

He said calculations done at the Ministry of Finance indicated that an oil price of US$110 would mean a Government subsidy of $2.9 billion, with the oil levy which goes towards paying the subsidy, being a mere $509 million.

If oil goes to US$125 a barrel, the estimated subsidy would be in the order of $4 billion, of which the contribution of the oil levy would be $600 million, he said.

The levy is meant to capture revenue from high oil prices, but the Prime Minister said in the early days the levy covered the cost of the subsidy, but the cost of the subsidy to the Treasury has way exceeded the contribution from the levy.

He said if the oil price goes to US$150, the Government’s liability, if it were to maintain gas prices at the existing levels, would be $4.48 billion. “The question is this: can we find that money to subsidise fuel, to insulate the population from this (hike)? That is the question we have to answer because that money is not available,” he said.

Subsidy headache

The Prime Minister said if there is no subsidy on premium gas, and the price of oil is US$100 a barrel, the price at the pump would move from $5.75 to $7.58 per litre, which is over $2 more.

Super gas with no subsidy would go from the current price of $4.97 per litre to $7.46; and diesel from $3.51 to $6.58.

The Prime Minister said people currently don’t watch how they use their cars, and don’t think about the use of fuel when they enter slow-moving traffic because of the price levels.

He said to pay for this subsidy, the Minister of Finance would have to engage in borrowing in order to subsidise gas. He said the ministry informed him that the estimated figures for the year 2022 with an US$100 a barrel oil price—which is quite possible—the estimated subsidy would be $897 million.

The levy on the Fund would be $459 million, and the Government subsidy would be $437 million.

“What this means, and the Government, through the Ministry of Finance, is working on that right now, the Government would have to make a decision as to how much funding we can find to subsidise, to take some ­pressure off the population. But the population cannot be insulated completely from the oil running at (prices of) US$120, US$130, US$140 a barrel.

“So do not see the hike in oil prices as opening up huge possibilities for earnings because the volumes at which we are producing oil are not the same volumes we had before when the subsidy was absorbed (by the levy),” he said.

Gas falling too

The Prime Minister said it is not only oil that was a problem. The country’s gas production was also falling.

In 2007, the country was producing four billion cubic feet of gas and there have been no major finds in recent years.

In 2008, it was four billion cubic feet; 2009—4.2 billion; 2010—4.3 billion; and then it started to fall; 2011—4.1 billion; 2012—4.12 billion, 2013—4.1 billion, 2014—4 billion; 2015—3.8 billion; 2016— 3.3 billion; 2017—3.3 billion; 2019—3.5 billion; 2020—3 billion; 2021—2.5 billion; and 2022, it is expected to be at 2.7 billion.

Rowley said serious decisions had to be made on how the ­country cuts its suit to fit the cloth.

“These are the facts that we are dealing with, and in the coming days the Government will say more on these matters, as we the Government... make these decisions and take the blows that go with it,” he said.

He said between 1997 and now, the total fuel subsidy was $38.1 billion, with $9.3 billion coming out of the levy and the Government footing the additional $28.8 billion shortfall.

Electrification of transport

The Prime Minister said the country’s fuel consumption had to go down.

He said he was putting the country on notice that it should begin to plan for the most efficient electric vehicles “because this country cannot go on tripling its use of fuel premium in the way it has done in the last four years”.

The Prime Minister said in 2018 the country was using 36 million litres of premium gasoline. Last year, 105 million litres were used.

“That means that the cars on the road are largely skewed ­towards vehicles that are using premium gasoline... Most of the cars require premium.

“So, even as we talk about removing the subsidy the consumption in the country of premium has gone from 36 million to 105 litres. We have seen a decline in (the use of) super gasoline from 687 million litres down to 452 million litres.

“So, if we go electric, those cars... using 105 million litres of premium would be electric, and the electricity would be generated from local gas as opposed to the use imported fuel. So right away, a policy is screaming at the Government to move towards electric vehicles and we have heard those screams,” the Prime Minister said.

He said only the day before, he had instructed the Minister of Energy to accelerate the Government’s programme of searching for and obtaining a new fleet of electric buses.

He said the Government will move “very soon towards ensuring that all public vehicles, not just buses, are electric. And the Ministry of Finance will move aggressively to encourage the driving population to use electric vehicles so that the benefit of energy vehicles will accrue to that target we set ourselves”.

He said that the country does not produce kerosene and he didn’t know who, apart from the aviation industry, used kerosene, but he was seeing an increase in the consumption of kerosene from seven million litres to 22 million litres.

“And I have asked the Ministry of Energy to explain that because I don’t know where that is going,” he said.

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