Go Lean…Caribbean

Go Lean Commentary

One man’s trash is another man’s treasure; on the other hand, one man’s windfall is another man’s shortfall. This parallel poetry is indicative of what is transpiring in the world market for producers and consumers of oil. Consumers are enjoying a windfall with sub-$2.00 pricing (per gallon) while petroleum producing nations are having to suffer and adapt to a shortfall of revenues.

For one oil-exporting country in the Caribbean, Trinidad and Tobago, this constitutes a crisis. The book Go Lean … Caribbean was written to address crises, declaring in the foreword that a “crisis is a terrible thing to waste”.

See news article here:

Title: Trinidad and Tobago cuts 2015 budget as oil prices tumble
By: Ria Taitt, Political Editor
PORT OF SPAIN, Trinidad — A $7.4 billion (US$1.16 billion) budget shortfall as a result of falling oil prices is what Trinidad and Tobago Prime Minister Kamla Persad-Bissessar identified on Thursday night.

The PM reaffirmed that the support grants, senior citizens’ pension, new minimum wage and baby grants will be untouched. But she provided no precise cost-cutting details or any sacrifices that the population might be called upon to make.

What the Prime Minister did announce was the government’s 2015 budget would now be pegged on a revised oil price of US$45 a barrel, a 44 percent reduction from the original benchmark of US$80 a barrel.

The natural gas price on which the budget is premised was also revised, from US$2.75 per mmbtu to $2.25 per mmbtu, she stated.

This points to a major realignment in Government revenue and therefore adjustments in spending.

However, delivering her address to the nation on the economic situation, in light of the new budgetary and fiscal situation, Persad-Bissessar identified savings in government expenditure from one source — $1.4 billion from a lower fuel subsidy outlay.

“What (areas) are we adjusting? In moving forward there’ll be areas where we must moderate or redirect our spending in order to manage the present situation, always making sure that we keep people and country first — reviews of our PSIP and current expenditure are ongoing, with the aim of identifying savings of approximately $4.5 billion,” the Prime Minister stated.

“Amongst the areas identified for re-directional spending and indeed in helping us to make up the shortfall of the $7.5 billion… these are the areas that we would consider — infrastructural projects for which funding has not yet been confirmed; lower expenditure on non-critical goods and services; and cuts in allocation in selective ministries by about 15 percent.

“Any additional shortfall will be met from revenues generated as a result of our continued public offering programme,” she added, referring to the IPO to be held for the public sale of shares in Phoenix Park Gas Processors Limited.
“This would be the first-ever listing of an energy stock on the local stock market, thereby giving the citizens a direct stake in our very important energy sector.”

The Prime Minister said the international credit rating agencies, Standard and Poor’s and Moody’s, have projected that oil will rebound to between US$62.7 and US$70 a barrel in the near to medium term.

However, she said, government decided to use the “more conservative assumptions” (of US$45 a barrel) for oil and gas.
“What this means is that the shortfall we may experience in Trinidad and Tobago would be in the region of TT$7.4 billion,” she said.

The price of oil has moved from a high of US$107 per barrel in June 2014 to US$48.65 at the close of business on Thursday, representing a 55 percent decline, Persad-Bissessar pointed out.

But in noting that the country had to adjust its spending, she committed her government to continue expenditure on “the things that matter most to you (the population)”.

Persad-Bissessar singled out the energy corridor — San Fernando to Mayaro highway, describing it as a “key investment”.
She also cited her government’s commitment to the “provision of protection to the vulnerable and disadvantaged; to ensuring the pace of business activity continues; to preserving jobs and personal incomes; to intensifying its efforts in making our nation safer; to maintaining successful investments in education; to making improvements in the quality of health care so urgently required; and to keeping our commitment to critical infrastructure projects, including schools, hospitals and the housing programme”.

The Prime Minister gave the assurance that her government will navigate safety through these turbulent times.
She pointed to the achievements of her government, stating that the economic fundamentals were stronger today than ever and that her government’s economic policies had halted the decline that it inherited.

Persad-Bissessar recalled that, when she was a member of the government in the 1990s the oil price fell to as low as US$9 a barrel, yet the economy was kept strong and investor confidence high and stability was maintained.

“I make this reference to reinforce the reference that Trinidad and   Tobago has been here before and was able to overcome the challenges faced. The population can feel confident that once again the nation is fortunate to have a government in place that has demonstrated responsible fiscal policies, that has balanced investment in social programmes and people-centred development whilst simultaneously turning the fragile economy we inherited in 2010 into the stable and strong one that it is today,” she said.

“The same prudence with which we managed the economy since 2010, to bring us to a position of resilience and stability, will be used in shifting our priorities and maintaining stability,” the Prime Minister stated.

“History will record this period as one of our finest when we stood strong, made the right choices, exercised the right amount of restraint, held the right course and indeed saw the right results,” Persad-Bissessar said.

Before delivering her address, the Prime Minister met with senior executives of the energy companies in the state sector and the Ministry of Energy and held another meeting of a sub-committee of the Cabinet.

Republished with permission of the Trinidad Express
Caribbean News Now – Regional Online News Site (Posted 01-10-2015; retrieved 01-12-2015
http://www.caribbeannewsnow.com/headline-Trinidad-and-Tobago-cuts-2015-budget-as-oil-prices-tumble-24325.html

In 2008, a pivotal year in Go Lean consideration, prices for a gallon of gas reached $5.00 in some locations, (California for example). Now most locales in the US are enjoying sub $2.00/gallon prices. See this reporting in a previous blog.

There is no evil, no malice at work here; the fluctuations in oil prices is simply a product of economics, of supply-and-demand. Higher demand, lower supply equals to higher prices. While on the other hand, higher supply and lower demand equals lower prices. The forces pushing for higher prices (OPEC) are simply pursuing their stakeholders’ self-interest.

Trinidad, a non-OPEC country, is simply squeezed in the middle. The Go Lean book serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU). This federation is built on economic principles, designed to exploit the best practices of the social science of global economics. Instead of looking for ways to increase supply-demand of petroleum, the CU seeks to diversify: energy mix of the 30 Caribbean member-states and the revenue generators of the overall Caribbean economy. In fact, the CU/Go Lean roadmap has these 3 prime directives:

• Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
• Establishment of a security apparatus, including energy security, to protect the resultant economic engines.
• Improve Caribbean governance to support these engines.

The goal of the CU is to optimize Caribbean society, allowing us to better compete globally and hopefully present more favorable options for our youth to prosper here at homeland, instead of fleeing the region as practiced by previous generations.

Considering the foregoing article, it is obvious that Trinidad’s economy is overly dependent on the oil market. An unsavory dip in oil prices is affecting all aspects of this country’s societal engines (economy, security and governance). This is not a formula for success. This describes a mono-industrial society; they ebb-and-flow with the fortunes of the one economic driver. This is also the case in many other Caribbean member-states with their mono-industrial expressions of tourism. The region needs to do better with the diversification quest. The Go Lean roadmap asserts many unrelated, disconnected, industries for job creation – a decades-old pursuit.

Despite an oil-producing country in the region, this Go Lean/CU roadmap pursues a viable mix of energy sources for Caribbean deployment. The book proposes solutions for the region to optimize energy generation, distribution and consumption. Some features include solar/wind/tidal power generation, a regional power grid, electric mass transit street cars, natural gas vehicles, electric-hybrid passenger cars, and the separation of power generating and power distribution utilities. The Go Lean posits that the average costs of energy can be lowered from an average of US$0.35/kWh to US$0.088/kWh with this roadmap. (Page 100).

Just how does energy affect our modern world? See VIDEO here depicting Exxon’s (known in the Caribbean as ESSO) strategic expressions in the world:

VIDEO: Energy lives here™ anthem – http://youtu.be/FZ3S2EOBbwE

Published on Nov 27, 2013 – If you could see energy, what would you see? It powers our lives. And no one applies more technology to produce American energy and refine it more efficiently than ExxonMobil.

The Go Lean roadmap details a series of community ethos, strategies, tactics, implementations and advocacies to foster the progress in the wide fields of the energy business: generation, distribution and consumption. The following list applies:

This commentary asserts that the Caribbean energy needs are undeniable and that the oil-depended economy of Trinidad & Tobago needs to diversify. The CU/Go Lean roadmap is here to help Trinidad, and all of the Caribbean. On a “per capita” basis Trinidad is among the most affluent of the Caribbean independent member-states (Page 66), even higher than the US Territory of Puerto Rico. But Trinidad sorely needs the mitigations and empowerments in this roadmap; their status quo is unsustainable; too many of their human capital flee their homeland, just like many other Caribbean locations.

More changes are imminent for Trinidad. After the $5.00/gallon prices of 2008 the world has a new resolve, to be less-dependent on oil. That imminence has now materialized with the manifestation of more energy options and less demand for oil. Thusly, oil prices have declined. It is the expectation that more efficiency and diversity will emerge and assimilate the world economy. The CU/Go Lean roadmap is designed to bring that efficiency and diversity to the Caribbean region as well.

The Go Lean roadmap will prepare and mitigate Trinidad & Tobago, and the rest of the Caribbean for global changes.

Trinidad’s oil reserves are also depleting … fast (Page 240). The stakeholders of Trinidad’s economic, security and governing engines cannot “stick their heads in the sand” while these change dynamics emerge. There is the need for heavy-lifting.

Now is the time for all of the Caribbean, the people, business, institutions and governments, to lean-in for the efficiencies and diversities described in the book Go Lean … Caribbean.  🙂

Download the Book Go Lean … Caribbean – Now!