What is best for the oil industry?

First Published: 2004-09-17

A quick search of the Internet suggests that the Ministry of Trade and Industry, headed by Minister Leslie Miller, should more correctly be named the Ministry of Consumer Affairs, as that is where the Minister focuses his attention.

In Trinidad and Tobago the Mission of the Ministry of Trade and Industry is "responsible for the development of policies and strategies to promote trade and investment and to facilitate industrial development".

In Singapore the Mission of the Ministry of Trade is "To promote high and stable levels of economic growth and employment, so that all Singaporeans have ample opportunity to improve their standards of living. We do this by: Facilitating the development of industry sectors with strong growth potential and fundamentals etc."

In The Bahamas the Minister of Trade and Industry, Mr. Leslie Miller has been faulting the gas companies for the price of gasoline. His solution for higher prices is a government take-over of the wholesale supply.

His assumption that government can control prices by getting into the gas and oil business could not be more wrong.

Role of Government

The government has an important but limited role in furthering enterprise and the development of new industry. It is not required, nor is it desirable for government to be directly involved in a particular enterprise such as the National Energy Commission (NEC).

Government facilitates market activities and optimum price levels in its legitimate role of regulator and arbitrator though an impartial court system and due process.

Government errs when it becomes directly involved in enterprise better suited for profit making enterprise. We are reminded of the cost to tax payers when government tried the hotel business and the persistent annual losses in the airline business.

The following are some questions for Mr. Miller and his proposal for a National Energy Corporation.

1. Has a cost benefit analysis been undertaken?

2. Who will run the enterprise and what are his/her qualifications?

3. How many employees will be required?

4. What is the annual cost of running the enterprise?

5. What is the cost of maintaining the storage and distribution facilities?

6. Who will be responsible for water in gas when a consumer is affected etc?

7. Is it intended to be a profit-making enterprise? If so what are projections for anticipated profits?

8. Will a citizen have the right to sue the NEC and the government in the event of an accident?

9. Can government guarantee a gas price lower than now supplied by private suppliers? How much lower, what is the differential and how long will it last?

There are also a few other important considerations in this debate:

1. What impact would there be if the government opened the market to other oil suppliers?

2. What impact would be had if more gas stations were allowed to open? In other words, lift the government moratorium?

3. What would be the effect of removing price controls on gasoline?

4. Would it be necessary to tax gasoline so heavily (reportedly $1.06 per gallon plus Stamp Tax) if government would control its expenditures and ran more efficient Ministries, departments, agencies and corporations?

If other examples of state-run enterprise are typical, count on higher costs for poorer service.

The real cost of unprofitable government enterprise is hidden in taxes paid by consumers. The inevitable waste, characteristic of all governments, becomes an additional burden on the already overstretched treasury.

By the way, it might also be useful to assign the department of trade and industry under the Ministry of Finance and leave the present Minister in charge of Consumer Welfare, where his passion seems to lie.

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