How fuel subsidy only spoils T&T consumers
The disclosure last week by Energy Minister Kevin Ramnarine that the fuel subsidy consumed $3.2 billion in just the first nine months of this fiscal year is a reminder of the ever-rising cost of keeping T&T on the move. People of T&T have of course to get around for work, business, pleasure, and other purposes of normal life.
Operation of the fuel subsidy means, however, that citizens and, apparently also, well-placed non-citizen operatives can afford to get around by the least cost-effective ways of doing so. It is the State, at rising multi-billion-dollar expense, which underwrites road, sea and air transport by eliminating or cushioning the exposure to real-world fuel costs.
Relatively dirt-cheap fuel, so far from being a temporary palliative, has come to be assumed as an expectation, and even an entitlement. One result has been non-stop growth in the population of private cars, and also of high-end vehicles, acquired by people with incomes so elevated as not to need a state subsidy.
An observable further result, of course, is that, with the fuel subsidy lowering the cost of operating vehicles, private transport proliferates. This is reflected in immovably heavy traffic, and also dangerous road conditions. For sure, efficient and affordable public transport can hardly be realised against such competition from private options. The subsidy, then, which reduces costs of doing business, also allows Caricom critics to argue, perhaps unanswerably, that T&T export manufacturers enjoy an unfair advantage over those of Jamaica.
Meanwhile, fuel is kept cheap through ever-more reluctant state benevolence, even as the nationally owned airline no doubt bases its business plan on the assurance of fuel cheaper than available to other airlines. Successive administrations have done little more than worry aloud about the cost, including opportunity cost, of the subsidy. Knowledgeable observers conclude that this good thing can hardly last forever.
The net counsel is that motorists, businesspeople, and others should ready themselves for the day when fuel will simply cost more, maybe much more. That is to say, something at or near the world market prices for gasoline and diesel. For now, though Finance Ministers have been complaining, the Treasury just keeps on bankrolling the T&T travelling public, who in turn are enabled to entertain only the most lavish and least economical thoughts about their own fuel consumption.
With deficit budgets now the norm rather than the exception, T&T fuel consumers remain spoiled into regarding the good times of dirt-cheap gasoline and diesel as a gift entitlement that will just keep on giving. Overnight subsidy removal is unthinkable economically and politically. Certainly, however, the Government and everyone else should give active thought to adopting, at the national and individual levels, a plan based on the inevitable weaning of motorists away from this suckling of the Treasury for unsustainable benefits of subsidised fuel.