Caption: The mothballed refinery at Pointe-a-Pierre. AZP News/Prior Beharry
By Dr Neil Gosine
IN 2018, the Government of Trinidad and Tobago announced the closure of Petrotrin, the state-owned oil company that had been a cornerstone of the nation’s economy for over a century.
This decision, aimed at curtailing financial losses and inefficiencies, has since had far-reaching consequences on the country’s fuel security, foreign exchange reserves, and overall economic stability.
Petrotrin’s closure marked the end of local refining operations, which led to the increased importation of refined petroleum products to meet domestic demand. This shift has exposed the country to global market volatility and supply chain disruptions. Prior to the closure, Trinidad and Tobago benefited from a more self-sufficient energy model, where crude oil extracted domestically was refined locally, ensuring a steady and predictable supply of fuel.
With the closure of refining activities, the country now relies on imports to supply gasoline, diesel, and other petroleum products. This dependency on foreign markets has introduced new vulnerabilities although the minister of energy and energy industries may try to deny this point. Any geopolitical tension, supply chain disruption, or global price fluctuation directly impacts the availability and cost of fuel within the country.
The economic ramifications of Petrotrin’s closure extend beyond fuel security. As a significant contributor to the nation’s foreign exchange earnings, Petrotrin played a vital role in stabilising the local currency and maintaining foreign reserves. The minister of energy will try as he may to deny this impact that Petrotrin had on maintaining foreign reserves. The loss of revenue from Petrotrin’s operations has created a substantial gap in the country’s foreign exchange inflows.
Historically, Petrotrin’s export of refined products generated considerable foreign exchange, which was essential for funding imports and supporting the local economy. The shift from an exporter to an importer of refined products has reversed this dynamic, increasing the demand for foreign currency to pay for these imports. Consequently, Trinidad and Tobago has experienced a depletion of foreign exchange reserves, exerting pressure on the exchange rate and contributing to economic instability.
The foreign exchange shortage has had a ripple effect on various sectors of the economy. Businesses that rely on imported goods and services have faced challenges in obtaining the necessary foreign currency, leading to delays, increased costs, and reduced competitiveness. Additionally, the reduction in foreign exchange earnings has constrained the government’s ability to invest in infrastructure, social services, and economic diversification efforts, further impeding the country’s growth prospects.
Beyond the macroeconomic effects, the closure of Petrotrin has also had significant social and employment implications. Thousands of workers were displaced, leading to increased unemployment and social unrest. The loss of jobs in the refining sector has had a cascading effect on related industries, including logistics, maintenance, and support services, exacerbating the economic hardship faced by many communities.
Efforts to retrain and redeploy displaced workers have been underway, but the scale of the challenge is immense. The loss of high-paying jobs in the oil and gas sector has contributed to a decline in household incomes and consumer spending, further dampening economic activity. Citizens in this sector are suffering and it has had a ripple effect on many businesses.
The closure of Petrotrin represents a watershed moment in Trinidad and Tobago’s economic history, with profound implications for fuel security, foreign exchange stability, and overall economic health. While the decision to close the state-owned entity was driven by financial considerations, the resulting challenges underscore the need for a comprehensive and strategic approach to energy security and economic diversification.
Going forward, it is imperative for Trinidad and Tobago to develop a robust energy policy that balances the need for fuel security with economic sustainability. Investments in renewable energy, improved efficiency, and strategic partnerships for refined product imports are essential components of this policy. Additionally, efforts to bolster foreign exchange earnings through diversification of the economy, particularly in sectors such as tourism, agriculture, and manufacturing, will be crucial in mitigating the long-term impacts of Petrotrin’s closure.
Although the IMF expected growth to gain momentum in 2024, estimating our economy to expand by 2.4%, led by the non-energy sector, this is still not good enough. People who live here know the suffering and know how fast a blue 100 dollars evaporate. It does not go very far in paying bills.
In addressing these challenges, the country can pave the way for a more resilient and sustainable economic future, reducing its vulnerability to external shocks and ensuring a stable and prosperous environment for its citizens.
Neil Gosine is an insurance executive. He was appointed a temporary Opposition Senator and is also the treasurer of the UNC and a former chairman of the National Petroleum Marketing Company of Trinidad and Tobago. He holds a Doctorate in Business Administration, a Master’s in Business Administration MBA, BSC in Mathematics and a BA in Administrative Studies. The views and comments expressed in this column are not necessarily those of AZP News, a Division of Complete Image Limited.
Commentary: The Impact of Petrotrin’s Closure
Caption: The mothballed refinery at Pointe-a-Pierre. AZP News/Prior Beharry
IN 2018, the Government of Trinidad and Tobago announced the closure of Petrotrin, the state-owned oil company that had been a cornerstone of the nation’s economy for over a century.
This decision, aimed at curtailing financial losses and inefficiencies, has since had far-reaching consequences on the country’s fuel security, foreign exchange reserves, and overall economic stability.
Petrotrin’s closure marked the end of local refining operations, which led to the increased importation of refined petroleum products to meet domestic demand. This shift has exposed the country to global market volatility and supply chain disruptions. Prior to the closure, Trinidad and Tobago benefited from a more self-sufficient energy model, where crude oil extracted domestically was refined locally, ensuring a steady and predictable supply of fuel.
With the closure of refining activities, the country now relies on imports to supply gasoline, diesel, and other petroleum products. This dependency on foreign markets has introduced new vulnerabilities although the minister of energy and energy industries may try to deny this point. Any geopolitical tension, supply chain disruption, or global price fluctuation directly impacts the availability and cost of fuel within the country.
The economic ramifications of Petrotrin’s closure extend beyond fuel security. As a significant contributor to the nation’s foreign exchange earnings, Petrotrin played a vital role in stabilising the local currency and maintaining foreign reserves. The minister of energy will try as he may to deny this impact that Petrotrin had on maintaining foreign reserves. The loss of revenue from Petrotrin’s operations has created a substantial gap in the country’s foreign exchange inflows.
Historically, Petrotrin’s export of refined products generated considerable foreign exchange, which was essential for funding imports and supporting the local economy. The shift from an exporter to an importer of refined products has reversed this dynamic, increasing the demand for foreign currency to pay for these imports. Consequently, Trinidad and Tobago has experienced a depletion of foreign exchange reserves, exerting pressure on the exchange rate and contributing to economic instability.
The foreign exchange shortage has had a ripple effect on various sectors of the economy. Businesses that rely on imported goods and services have faced challenges in obtaining the necessary foreign currency, leading to delays, increased costs, and reduced competitiveness. Additionally, the reduction in foreign exchange earnings has constrained the government’s ability to invest in infrastructure, social services, and economic diversification efforts, further impeding the country’s growth prospects.
Beyond the macroeconomic effects, the closure of Petrotrin has also had significant social and employment implications. Thousands of workers were displaced, leading to increased unemployment and social unrest. The loss of jobs in the refining sector has had a cascading effect on related industries, including logistics, maintenance, and support services, exacerbating the economic hardship faced by many communities.
Efforts to retrain and redeploy displaced workers have been underway, but the scale of the challenge is immense. The loss of high-paying jobs in the oil and gas sector has contributed to a decline in household incomes and consumer spending, further dampening economic activity. Citizens in this sector are suffering and it has had a ripple effect on many businesses.
The closure of Petrotrin represents a watershed moment in Trinidad and Tobago’s economic history, with profound implications for fuel security, foreign exchange stability, and overall economic health. While the decision to close the state-owned entity was driven by financial considerations, the resulting challenges underscore the need for a comprehensive and strategic approach to energy security and economic diversification.
Going forward, it is imperative for Trinidad and Tobago to develop a robust energy policy that balances the need for fuel security with economic sustainability. Investments in renewable energy, improved efficiency, and strategic partnerships for refined product imports are essential components of this policy. Additionally, efforts to bolster foreign exchange earnings through diversification of the economy, particularly in sectors such as tourism, agriculture, and manufacturing, will be crucial in mitigating the long-term impacts of Petrotrin’s closure.
Although the IMF expected growth to gain momentum in 2024, estimating our economy to expand by 2.4%, led by the non-energy sector, this is still not good enough. People who live here know the suffering and know how fast a blue 100 dollars evaporate. It does not go very far in paying bills.
In addressing these challenges, the country can pave the way for a more resilient and sustainable economic future, reducing its vulnerability to external shocks and ensuring a stable and prosperous environment for its citizens.
Neil Gosine is an insurance executive. He was appointed a temporary Opposition Senator and is also the treasurer of the UNC and a former chairman of the National Petroleum Marketing Company of Trinidad and Tobago. He holds a Doctorate in Business Administration, a Master’s in Business Administration MBA, BSC in Mathematics and a BA in Administrative Studies. The views and comments expressed in this column are not necessarily those of AZP News, a Division of Complete Image Limited.