Sun | Feb 25, 2018

Don’t gamble on low oil prices, Golding tells JLP

Published:Wednesday | February 24, 2016 | 12:00 AM

A plan by the Jamaica Labour Party (JLP) to increase the Special Consumption Tax (SCT) on gas is being discouraged by Mark Golding, minister of justice.

“This funding source that they have said would fund a good portion of the cost of this raise in the threshold for persons earning under $1.5 million is a risky and imprudent source,” he said at a press conference organised by the People’s National Party (PNP) on Monday.

The JLP has said it would increase the SCT as a way to make up for the revenue that would be forfeited through a proposed increase in the income tax threshold for persons earning below $1.5 million.

Golding however, believes that the JLP has wrongly based its proposed increase in the gas tax on an assumption that gas prices will remain low.

“Nobody is able to say if the price of oil will continue to fall and the insurance policy that we have purchased to protect us for the near future is an important protection for the people of Jamaica that should not be randomly given up on a whim and a gamble that the oil price will stay down ... This is not time to gamble,” he said.

The SCT on petrol was last year increased to $7 per litre to finance payment for insurance policies which hedged against the price of oil. The SCT was expected to yield $6.4 billion.

“Part of the anticipated source that they have suggested is the SCT on gasolene that was imposed last year which was imposed in the context of falling oil prices so that some of the benefits to the consumer would be used to purchase an insurance policy that would guarantee that consumers would be protected if oil prices go back up. It also was put in place to protect our balance of payments because oil is our major import and we have benefited from the fall in oil prices, but it’s an extremely volatile market subject to all sorts of geopolitical vagaries,” Golding explained.

He further urged the JLP not to toy with the idea of giving up the protection provided by the oil hedge, given the fact that oil prices may increase without warning.

“We have already seen discussions started between the major oil producers ... in regards to restricting supply and to try to ensure that the price moves back up to a level which makes their economies viable ... furthermore, the situation with the PetroCaribe facility is less certain now, so to give up the protection in oil price rises in that context and given the volatility in the oil market is imprudent,” he said.