Crude oil prices yesterday plunged to a four-year record low average of US$40 per barrel, forcing the Prime Minister Patrick Manning administration to take an even closer look at the increasing volatility of the international markets.
In the United States, oil prices closed at US$40.81 per barrel and in London settled at US$39.86 per barrel. (See Page 10)
This new development comes less than a week after the Government cut expenditure to address an anticipated $5.3 billion deficit this fiscal year, using a new oil price for the Budget of US$55 per barrel as opposed to the original baseline price of US$70 per barrel.
Speaking to the Express on yesterday's global oil price plunge, Finance Minister Karen Nunez-Tesheira said while it was too early to discuss further budgetary cutbacks, her ministry "is certainly not being complacent about the situation".
"It is something that we must look at, and we are monitoring, and as we did after the Budget, we will make the appropriate response if it become necessary," Nunez-Tesheira said after yesterday's sitting of the House of Representatives at the Red House Port of Spain.
It was only one week ago that Central Bank Governor Ewart Williams had warned the population: "If oil prices fall to $30, $40 bets are off. I mean who knows what happens then."
Williams did so as he expressed his confidence that this country was in a strong enough position to avoid a recession next year, adding a recalibration of the 2008/2009 Budget was the right move to tackle inflation, which was recorded at 15.4 per cent last month.
This country earns less than the global average price for its crude oil and former Central Bank governor Winston Dookeran, the political leader of the Congress of the People (COP), had suggested the Manning administration cut its Budget using an oil price of US$30 per barrel. Energy economist Gregory McGuire had recommended a new oil price for the Budget of US$40-$50 per barrel, while energy consultant Tony Paul said a US$40 per barrel price would be best at this time.
In response to yesterday's development, Nunez-Tesheira said: "I think it is a little premature right now. I want to say right now, to give any kind of firm position with regard to it only to say that, of course, we are watching it as we did after the Budget when we saw the trend and we ... came back to the national community."
Yesterday, CNN reported crude oil prices had closed at US $40.81 per barrel, after the United States Labour Department reported 533,000 jobs cut in that country in November, the most since 1974. (See Page 31)
AP reported that light, sweet crude (the kind of oil extracted from his country's marine reserves) for January delivery fell to US$2.47 to US$41.20 a barrel on the New York Mercantile, while in London, January Brent crude slipped by US$2.42 cents to US$39.86 on the ICE Futures exchange.
"We will take the appropriate response and if and when it becomes necessary, as it did initially, and certainly we will do that if it becomes necessary in this case," Nunez-Tesheira added.
She said the continuing volatility in the global oil markets was something that all oil-based economies are paying attention to, as she pointed out that the price of natural gas, from which this nation derives its bread and butter Liquefied Natural Gas (LNG), is also seeing an unusual amount of instability.
"You realise what a difference even a week makes or even within one day. As I said to one of my colleagues just now asking about the price of gas, I said literally it starts with one price in the morning and could end up with another price in the evening and then another price in a matter of hours," Nunez-Tesheira said.
