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Economist Dr Vaalmikki Arjoon.

Economist Dr Vaalmikki Arjoon says since T&T imports its refined fuel consumers will end up having to pay a higher price for it with the surge in oil prices.

On Tuesday, Prime Minister Dr Keith Rowley said citizens may soon face higher gas prices at the pump as T&T was not insulated from a global increase in fuel prices brought on by Russia’s invasion of Ukraine.

Speaking to the Sunday Guardian Arjoon said “This means that the Government will face higher expenditure from the fuel subsidy, and this is a double whammy for the State.

“Now, of course, at least some of the subsidy can be offset by the increased revenues from the energy sector. Therefore, they should spare the nation, at least for some months ahead, especially as they will be earning some more revenues in avenues like royalties, the Supplemental Petroleum Tax.”

While the subsidy is not sustainable, he acknowledged now will be the worst time to remove it as this will undo any progress we have made in recovering from the damage of the COVID-19 pandemic. He said it would also have devastating consequences for overall prices, the cost of living and doing business locally.

He said if the State felt it must be done, then it should ease the country into it with a gradual removal and not pull the rug from under the people’s feet.

Arjoon emphasised that now was not the time to introduce yet another massive shock to the economy.

He asked whether it would be a removal of the subsidy or a removal together with a liberalisation of the fuel market. If it is being liberalised, he said, then Paria should not be the only entity allowed to import fuel.

Arjoon opined they should allow other entities to import as well so that the pricing mechanism becomes more competitive at the pump which will lead to cost savings for households and businesses alike.

He said when the price of oil was below $50 per barrel, motorists were paying an excess at the pump for both super and premium gasoline. Arjoon said the excess paid by consumers and earned by the State as additional revenues could be used to partially offset some of the subsidies as it certainly won’t be enough to offset all.

The economist said T&T was highly dependent on imports and shipping costs had escalated by nearly 500 per cent from 2020 into 2022 and businesses would have no choice but to increase prices to compensate for their higher costs.

Arjoon said household purchasing power had diminished, with many people still living on 2013/2014 salaries, making it more difficult to make ends meet.