The legendary French economist Frederic Bastiat had a simple method for telling a good economist from a bad one. A bad economist only takes into consideration the visible effect of policies. The good economist, on the other hand, always considers the “unseen’’ effects. The problem though is that good economists make bad politicians. And bad economists make Minister of Finance Colm Imbert. Hence even through the current debacle between Paria Fuel Trading and Unipet was foreseen for months and completely avoidable, Mr Imbert can feel safe knowing in Dr Keith Rowley’s Cabinet incompetence only appears to get you rewarded.
As of yesterday, drivers across the country had to queue in long lines for gas due to Paria cutting off supplies to Unipet service stations. Unipet stations account for one third of the market as well as about 99 per cent of gas stations that don’t smell of urine. Paria claims that Unipet has defaulted on payments and owes them about $100 million. And as anyone who worked on Carifesta or any of the thousands of businesses in T&T who are owed VAT refunds will tell you, the Government doesn’t tolerate late payments.
In T&T culture, private businesses get demonised as greedy and money hungry, vile creatures, equivalent to murderers, rapists and International Monetary Fund economists. No doubt the Government will stoke this irrational thinking in an attempt to redirect people’s anger towards Unipet. The truth, though, is that this crisis is entirely the government’s making, with its illogical price and tax structure solely to blame.
Petroleum economics is complex but you may be surprised to learn that gas station owners in T&T barely make a profit. In fact it’s far more profitable to be the wife of a minister who owns a building to rent than it is to open a gas station. That’s because in T&T the government has a monopoly on the price and supply of gas. Meaning, owners have no control over the price they can sell gas at, nor where to get their supply from. It all means Trinbagonians have far more choice and price options when it comes to buying roti than gasoline. Which would also explain why our roti industry is thriving more than our energy industry at the moment.
Gas stations in T&T make their profits from small margins, getting about 22 cents on every litre of gas sold. For example, when you fill up your tank with $100 worth of gas, only about $4 goes directly to the station. Now from that $4, subtract one dollar to pay the business levy and Green Fund. Then subtract a further dollar to cover Linx and credit card services. It means that for every $100 of gas sold, owners make about $2 gross profit. Not enough to buy a doubles.
That’s why when the Government raised the cost of gas, most of us couldn’t appreciate the irony that the people who were upset the most were gas station owners as their margin got even smaller. This brings us back to Bastiat. The Ministry of Finance should have known that in raising the cost of the Business Levy, Green Fund, gas prices as well as increasing the minimum wage would all have “unseen” consequences. One of which was to dramatically increase the operating costs of already struggling service stations, and thereby threatening our entire fuel supply chain.
But then again this is the same government whose Minister of Energy also a few months back didn’t seem to know if Paria Fuel was put up for sale or not.
It’s logical that if Unipet service stations are struggling to stay afloat, so too are National Petroleum (NP) stations. The difference, though, is that NP stations know how to keep their mouths shut. Plus when Unipet makes a loss, it’s a real loss. When NP makes a loss, it’s not a real loss because taxpayers get to pick up the bill.
Of course all of this could be avoided if Unipet could simply purchase their gas elsewhere and resell to customers. But that would make too much sense. Also, it would threaten the grossly inefficient monopoly the State has on fuel supplies. And as the motto of the public service proudly states: “If it ain’t broke, don’t worry we will get to it soon enough”.
It’s understandable that the State would want to recover monies owed to it, but surely it should also see how its own policies have contributed to this chaos. The most disturbing aspect of all of this is the way the Government has decided to play Russian roulette with Unipet. It’s the same arrogant way the National Gas Company has treated with downstream industries at Pt Lisas with some of them closing down as a result. Bullying and demonising private companies to do what you want is how dictators behave, not democratic policy makers.
And therein lies T&T’s real problem. It’s not a shortage of oil and gas; but rather an incompetent government short on brains.
• Darryn Boodan is a