CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2016 
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CARIBBEAN Petroleum Update A Publication of the Caribbean Energy Information System (CEIS)
Januar y 2016 ISSUE
Falling Oil Prices
The Impact on Trinidad & Tobago’s Economy Global oil prices have deteriorated sharply last year, dipping to levels not seen since 2010. The volatility of the global oil market has been heightened based on a culmination of various factors currently afflicting energy markets including geopolitical unrest and economic uncertainties. The decline in prices have largely come due to supply side factors, however weakening demand has also played a part. The glut in the market stems from the increased production levels in the US market due to shale gas production. Weakening macroeconomic fundamentals in some of the large economies (and therefore large
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consumers of oil) have also resulted in the adverse turn in the oil market. Oil prices are plummeting and the twin island republic of Trinidad and Tobago could devolve into chaos as a result. Since summer 2014, crude oil prices have fallen from over $100 a barrel to under $40 as at December 2015, with global supply continuing to outstrip demand. The consequences for oil producers are of unprecedented significance. While cheap oil is not continued on page 2/
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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2016
Falling Oil Prices: The Impac t on Trinidad and Tobago’s Economy a bad thing per se, it can trigger substantial economic disruptions. The United States is suffering job losses in the oil sector that ultimately outweigh the benefits of cheap energy, and a few oil exporters like Venezuela are visibly melting down. Since mid-2014, oil prices have been trending mostly downward from highs above US$100 in mid-2014 as abundant supplies were exacerbated by strong output by OPEC and the United States. Last year, the oil market tumbled by about one third after OPEC which pumps more than a third of global oil, refused to cut output in June and December. Declining oil prices have had a negative effect on T&T’s energy based economy which has experienced four quarters of decline and forecasted to shrink even more. In addition, a stronger US dollar was among factors that dented prices because it makes oil more expensive for buyers using weaker currencies, thereby weighing on demand. Oil prices have remained low despite heightened tensions between two of the world’s big oil-producing countries, Iran and Saudi Arabia. Even though Trinidad and Tobago produces much more gas than oil on an energy equivalency basis, plummeting oil prices will bring about major challenges for the energy dependent economy. The drop in the oil price could still have a negative impact on the government’s revenue and thus its ability to reduce the fiscal deficit.
continued from page 1/ forty percent of government revenues. The continuous fall in oil prices is of concern especially since the causes appear to have some permanent effect. Falling oil prices, as sustained as they were in 2015, will adversely impact export revenues and consequently government expenditure. Plummeting oil prices not only impact the macro-economic indicators of the twin island republic, but perhaps more adversely affected is economic confidence. While Trinidad’s economy produces more gas and the prices of natural gas have remained reasonably high this is of limited benefit because of the much greater return achieved from a barrel of oil compared to an equivalent amount of gas. In Trinidad’s case, even if there was an increase in the production of both crude oil and natural gas, it would be highly unlikely that the rise would dramatically offset, even partially, the impact of plummeting oil prices.
T&T will have to assess and plan accordingly as oil prices continue to tumble to a six-year low. The latest decline was triggered by US stockpiling, adding to a massive glut of crude around the globe. The West Texas Intermediate (WTI) average price fell to US$37.41 a barrel in December 2015, their lowest average since February 2009. With Trinidad’s national budget pegged to the barrel price of crude oil, tumbling oil prices should give rise to concerns about how the sharp fall in revenue will affect the economy. Primarily an energy-based economy, the T&T budget is constructed on an assumed oil price of USD80 per barrel, using the WTI measure and Trinidad and Tobago crude oil exports account for gas price of USD2.75 per mmbtu (Henry Hub). While about one third of export earnings and an approximate
120
WTI Prices of Crude Oil for the period June 2014 January 2016
US$/Bbl
100 80 60 40
June - Dec 2014
Jan - Dec 2015
20 0
Period
Jan 2016
CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2016 
it is difficult to predict future prices, based on global economic activities in the oil and gas sectors, one can assume that prices will remain low in the medium term. With this in mind, policy makers will have to embark on expenditure cutting strategies and find and promote avenues to increase revenue flows in non-oil sectors. Government borrowing will increase only if oil prices and gas/ downstream prices fall concurrently, and there is a squeeze on government revenue from the sector, particularly given the fact that elections were held in 2015 and the outlook points to a significant increase in government expenditure. In addition, in a low oil price environment, energy companies tend to cut back on investment and all types of expenditure as certain projects are no longer economically viable. This will further impact foreign direct investments as international oil companies may not want to raise funding or debt lines may no longer be available. Furthermore, on a micro-level however, because the energy sector comprise of mostly large multinational players, if oil prices were to decline further for a sustained period, key projects/ investments by those corporations may be reevaluated, as companies seek to rationalize expenses on the possibility of lower revenue.
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On a more positive side, low oil prices are positive for the country’s large expenditure on fuel subsidies and as such provide an opportunity for government to decrease energy subsidies and use the savings toward more targeted transfers, and to revise energy taxes. Also, low oil prices prove positive for net oil importing economies, some of which are Trinidad’s main trading partners With the price of crude oil remaining around the US$30/Bbl mark, energy producer such as BP Trinidad and Tobago (bpTT) and BHP Billiton have reported cost cutting measures by job cuts. In addition, according to the Central Bank of Trinidad and Tobago domestically crude oil and natural gas production fell during the period October-November 2015 which has adversely affected the downstream industries. The Central Bank of Trinidad and Tobago (CBTT) further outlined that in some of the non-energy sectors, most notably distribution and construction have shown dull activity over the October - November 2015 period. In other sectors such as construction, and manufacturing there have been lay-offs, however the sectors have remained relatively strong. Trinidad and Tobago will have to brace for constraints on the economy if global oil prices continue to plummet.
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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2016
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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2016
Prices at the Pump
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JANUARY 2016
At the end of January 2016, retail prices for Regular Unleaded Gasoline in the thirteen Caribbean countries experienced an overall decrease in prices. The highest decrease in retail prices when compared to the previous month was in Guyana (10%) while Monsterrat and Belize both showed 8% decreases. For Antigua, BVI, Jamaica, St.Kitts and Trinidad, price remained stable. The average retail price at the end of January 2016 was 3% lower when compared to the previous month.
Unleaded Gasoline: Regular : Average Retail Price – November/ December 2015-January 2016 (US$/Litre) COUNTRIES
Dec-15
Jan-16
2 Mths AVG
ANTIGUA/BARBUDA BARBADOS BELIZE B.V.I DOMINICA GRENADA GUYANA JAMAICA
1.11 1.41 1.20 1.21 0.82 1.08 0.95 0.94
1.11 1.36 1.11 1.21 0.80 1.06 0.85 0.94
1.11 1.41 1.20 1.21 0.82 1.08 0.95 0.94
MONTSERRAT ST. KITTS/NEVIS ST. LUCIA
0.95 0.94 0.89
0.87 0.94 0.88
0.95 0.94 0.89
ST. VINCENT/GRENADINES TRINIDAD & TOBAGO
0.91 0.42
0.87 0.42
0.91 0.42
AVERAGE RETAIL PRICES
0.99
0.96
0.99
1.60
Comparative Retail Pump Prices Regular Unleaded Gasoline January 2016 2 Mths Avg (Dec 2015-Jan 2016)
1.40
Jan-16
US$/Litre
1.20
2 Mths AVG
NOTE: *US Gallon = 3.785 L *Imperial Gallon = 4.546 L *As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with 10% Ethanol.
1.00 0.80 0.60 0.40 0.20 0.00
13 Caribbean Countries
See prices for all products at www.cippet.org
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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2016
International OIL PRICES
CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : JANUARY 2016
45.98
40.62
30.00
35.78
36.99
29.19
20.00 10.00 0.00 Period WK1
The highest weekly price seen in January 2016 for the commodity was US$36.99/bbl-reflected in week one while week four accounted for the lowest price of US$29.19/bbl. Average crude oil price at the end of January 2016 when compared to the average price seen in January 2015 showed and overall decrease of 33%.
WK2
WK3
WK4
Nov-15
Dec-15
Jan-16
MTH AVG
Average Monthly Crude Oil Prices 2013-2015 120.00
106.61
105.78
100.00 US$/Bbl
Prices continue to fall due to a number of reasons. China’s economic slowdown has curbed appetite for commodities in general, while Saudi Arabia, which produces a third of the Opec cartel’s output, is keener on preserving its market share than it is on cutting production to boost prices.At the same time, the rise of the US as a shale gas producer means it now imports less oil, adding to the glut on world markets..
Average Weekly and Monthly Crude Oil Prices November - January 2016
40.00 40.40 US$/Bbl
Analysis of International Crude Oil Prices for the November to January 2016 period showed an average price of US$37.58/bbl . This average price was 22.7% lower than the average price reported in November 2015 and 12.2% lower than the price in December 2015.
50.00
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80.00 60.00
59.91
40.00 20.00
2013
2014
2015
0.00
Period
FEATURED OFFERS: P E TS TATS - t h e Ca r i b b e a n E n e rg y I n fo r m at i o n System (CEIS) primary report of historical annual petroleum energy statistics provided for 18 Caribbean Countries. Included are data on total energy production, consumption, and trade; overviews of petroleum, natural gas, electricity, as well as financial and environmental indicators for over twenty years.
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