Trinidad & Tobago: Economic risk management

…Any government that depends on the proceeds (taxes) from the energy sector has to be cognisant of the risks attached to its cash flow, of the concept that petroleum is a finite and depleting resource. As a result it has to manage the economy to alleviate as much as possible the impact of this risk on the operation of the economy. Our Government has recognised the risk of price volatility in the market, though with Peak Oil the only way for average prices to go, appears to be up, and has set up a Stabilisation Fund.

However, it is yet to acknowledge the traditional exploration risk of the industry which increases with age of the current fields as recognised by bpTT, BG and BHP. We have not found any new gas reserves for sometime now and though we HOPE that there is more out there, the risk (probability) that there is no more is not zero. Surely we have to give new and more incentives for Big Oil to keep digging, keeping in mind as I demonstrated last week that we are now on the declining slope of marginal returns for gas. The people whom the population trust should be telling us about the risks and how these are being managed instead of saying to have faith and not to worry, be happy. These risks are aggravated by the global Peak Oil phenomenon.


The important risks ahead of us are: how are we ensuring energy security locally for the population? Clearly it appears to be most inefficient to run down our reserves, selling cheap gas, and then import high priced petroleum from Big Oil in Africa. Another risk is how are we going to ensure adequate food security now that the world prices of food are escalating again because of Peak Oil? Another is how are we going if at all to manage the risk of a decline in the tourism industry because of rapidly increasing fuel costs, again because of Peak Oil. Lastly but potentially the biggest risk is how are we going to craft a “beyond petroleum” economy that can take us to what some see as Vision 2020 and beyond?

Trinidad and Tobago Express