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​Energy prices surge, global volatility presents opportunities and risks for Trinidad and Tobago

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Dave Dookie, Managing Director

 

​Higher global energy prices are emerging as one of the most significant macroeconomic variables for Trinidad and Tobago in 2026. As a hydrocarbon dependent economy, government revenues, critical foreign exchange inflows, and overall fiscal stability remain closely linked to movements in oil and natural gas prices. Recent geopolitical developments in the Middle East over the last week and tightening global energy markets are therefore particularly relevant for the country’s economic outlook. The US-Israel conflict with Iran has spread to major energy producers in the middle east, fueling a rally in oil prices, Brent crude surged by more than US$20 during the week, closing on Friday at US$92.69 per barrel, representing a 28% weekly increase, according to Bloomberg.

 

The Government of Trinidad and Tobago’s 2026 national budget is based on an oil price assumption of approximately US$73.25 per barrel and a natural gas price assumption of roughly US$4.25 per MMBtu. On this basis, the government projected a fiscal deficit of approximately TT$3.9 billion for FY2026, reflecting continued structural fiscal pressures and moderate revenue growth. However, if global oil prices remain above the budget assumption due to geopolitical risk or supply constraints, the country could experience a meaningful improvement in fiscal revenues.

 

If Brent crude oil were to average US$90 per barrel in 2026, compared with the Government of Trinidad and Tobago’s budget assumption of US$73.25 per barrel, the resulting price increase of approximately US$16.75 per barrel would provide a meaningful fiscal uplift for the country. Based on estimated national crude oil production of roughly 50,000 barrels per day, equivalent to approximately 18.25 million barrels annually, the higher price environment would generate an additional US$305 million in gross oil production value over the course of the year. While the government does not capture the full value of oil production, fiscal revenues derived from petroleum taxes, royalties, and state participation typically account for roughly 40–50% of incremental oil revenues.

 

Applying an estimated 45% fiscal take, the Government of Trinidad and Tobago could therefore realize approximately US$135–140 million in additional annual energy revenues, equivalent to roughly TT$900 million to TT$1.0 billion at current exchange rates. Given that the FY2026 national budget projects a fiscal deficit of approximately TT$3.9 billion, sustained oil prices around US$90 per barrel could reduce the deficit by roughly 20–25%, assuming production levels remain stable. In addition, to crude oil revenues, higher global energy prices could also support government income through stronger natural gas, LNG, and petrochemical export earnings, which remain the dominant contributors to Trinidad and Tobago’s energy sector revenues. These developments can help improve Trinidad and Tobago’s foreign exchange inflows, strengthen the balance of payments, and reduce pressure on the country’s fiscal deficit.

 

Despite the potential benefit from higher energy prices, Trinidad and Tobago continues to face structural challenges within its energy sector. Oil production has declined significantly over the past decade and currently averages roughly around 50,000 barrels per day, compared with nearly 80,000 barrels per day ten years ago. This decline means that higher prices generate less incremental revenue than in previous commodity cycles. Nevertheless, several upcoming offshore developments are expected to stabilize natural gas production over the medium term, which could support LNG exports and petrochemical output early in 2027.

 

Global energy prices have been supported in recent weeks by rising geopolitical tensions in the Middle East, particularly between Iran and Israel. Markets remain concerned about the potential for regional escalation that could disrupt oil supply routes in the Persian Gulf. The Strait of Hormuz, through which approximately 20% of global oil shipments pass, remains a critical strategic chokepoint. Any disruption to shipping through this region could push oil prices significantly higher in the near term.

 

These geopolitical risks have already introduced a risk premium into global energy markets. Oil prices have remained firm due to a combination of tight supply conditions, strong global demand, and limited spare production capacity within OPEC+. At the same time, global natural gas markets remain relatively tight due to strong LNG demand from Europe and Asia.

 

In the United States, equity markets experienced moderate volatility during the past week as investors weighed geopolitical risks and reassessed technology sector valuations. Major indices recorded modest declines, with the S&P 500 falling approximately 2.0% for the week, the Nasdaq Composite declining about 1.2%, and the Dow Jones Industrial Average easing roughly 3.0%. The pullback reflected a rotation by investors out of high-valuation technology stocks and into more defensive sectors such as energy and utilities, which benefited from rising oil prices and increased geopolitical uncertainty. Despite this short-term volatility, U.S. equity markets remain near historic highs and continue to be supported by strong corporate earnings, resilient consumer demand, and broadly stable economic growth.

 

If Brent crude oil remains around US$90 per barrel, the inflation impact for Trinidad and Tobago would likely be moderate but mixed due to the country’s position as an energy exporter. Trinidad and Tobago imports a significant portion of its food, manufactured goods, and consumer products, higher global energy prices would increase shipping, logistics, and production costs internationally, contributing to imported inflation domestically. As a result, while stronger energy revenues improve the fiscal outlook and macroeconomic stability, consumer prices could still edge higher, with inflation potentially trending towards above 2 percent, driven primarily by higher global transport and food costs rather than domestic demand pressures.

 

Overall, elevated oil and natural gas prices present a mixed outlook for Trinidad and Tobago. In the short term, higher energy prices could provide important fiscal support and improve foreign exchange liquidity. However, the country’s long-term economic resilience will depend on reversing production declines, attracting new upstream investment, and continuing efforts to diversify the economy beyond the energy sector.

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Dave Dookie is the Managing Director of Waterloo Capital Advisors Limited, a Trinidad and Tobago based financial advisory firm specializing in investment management, capital markets and structured finance. He has advised governments, financial institutions, and energy companies on debt issuance, project financing, and strategic capital raising across the Caribbean. He holds degrees and advanced qualifications from the London School of Economics and Political Science (LSE) and the University of London and has completed advanced training in data science through the MIT Applied Data Science Program.