Oops! We got the oil price wrong!

Finance Minister Karen Nunez-Tesheira admitted Friday that the Government "got it wrong" when it based its 2008/2009 Budget on an oil price of US$70 per barrel. But she said several other energy-sector based economies also missed the mark in predicting future oil prices

Critics have said the projected US$70 oil price was not prudent. The minister responded by saying that the United States, Indonesia, Iraq and Venezuela all based their budgets on higher oil prices.

She said even Opposition MP Kamla Persad-Bissessar suggested an oil price of US$68 per barrel when she presented her response to the budget.

"That's what the Opposition gave as their planning price, based on what the member of Siparia said was the opinion out there. Is there a marked difference between 68 and 70? Two dollars? It only stands to reason that whatever they used, is what we were using," Nunez-Tesheira said.

"So did the Opposition get it wrong? They got it wrong. Did we get it wrong? We got it wrong. Did Iraq get it wrong? Yes. Did Indonesia get it wrong? Yes. Did Venezuela get it wrong? Yes. That's what you must say."

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Prime Minister Patrick Manning is scheduled to address the nation Sunday to give an update on decisions taken by cabinet on what cutbacks in Government expenditure would be made to deal with the impact from the global financial crisis on the local economy.

Persad-Bissessar called on government Friday to debate in Parliament any revised budgetary measures to ensure transparency and accountability. She said such a debate must be under the heading of "urgent public importance".

The former cabinet minister said any budgetary changes without consultations with stakeholders and Parliamentary approval would contravene the principles of parliamentary democracy.

Nunez-Tesheira said government is taking "responsible" action by readjusting its expenditure projections for the remainder of the 2008/2009 financial year that began on September 1.

Despite the minister's admission she, Manning, and others in the Cabinet had maintained their decision on the US$70-per-barrel oil price was in keeping with the record high average oil prices for the year up to September 22 Budget presentation projecting a $49 billion expenditure package for the 2008/2009 financial year.

On that date the price of oil had dropped nearly $US50 a barrel from its record peak of US$147.27 per barrel in July to US$100 per barrel. Energy experts cautioned then that the anticipated price of US$70 was too high and suggested that it be revised to a lower level.

Former Central Bank Governor Winston Dookeran advised a week ago that the government should revisit its budget and calculate revenues based on a price of US$30 per barrel. The finance minister still insists that the research and advice for the budget "came from the IMF, came from OPEC, came from the budget price of the companies doing business in our country."

She said as late as October the IMF was still projecting a US$100 oil price for the global markets and only two weeks ago recommended the Government readjust its Budget using an oil price of US$61 per barrel.