New records in oil prices were established on world stock exchanges. On Wednesday, prices were over 130 dollars for a barrel. Within a year, oil prices have doubled. What prompted a jump in oil prices on Wednesday was US statistic data. Gasoline consumption increased by 1.5 percent there within a week, whereas its reserves fell by 12 percent. In the summer, the holiday season, gasoline consumption reaches its peak. No wonder, experts predict more records, some even speak of 200 dollars per barrel by the end of the year.
OPEC countries controlling almost half of world’s oil extraction do not intend to increase oil deliveries to the market. They say the reason behind all these price leaps is endless speculations on stock exchanges that have nothing to do with supply and demand. True, the price of oil is overvalued. Something can happen on the oil market by the end of the year, and only then will it be clear what is the state of the oil and gas supply and what is the demand for it. Certainly, oil prices will fall if more oil is delivered to the market. Yet, such opportunities are limited since only Saudi Arabia of the OPEC states has the additional capacity to allow it to increase oil deliveries to the world market.
At present, there is an operator on the oil market which does not take part in the game. This is Iraq. There can be no talks of large-scale oil deliveries to the world market from Iraq until the situation in the country returns to normal. Iraq can deliver much more oil and gas than it does today, but, the political situation in the country is still complicated. There are numerous projects to attract foreign investment to the development of oil extraction and exports, but, no one can say with certainty when Iraq is ready to deliver larger amounts of oil and gas. Nonetheless, in the past, Baghdad played a role in lowering oil prices. That was in 1988, soon after the end of the war between Iraq and Iran. Then, oil prices dropped to 9 dollars a barrel. 20 years later, prices are different. Even so, stabilisation in Iraq and the region surrounding it can favourably influence the world fuel market. This is what experts bear in mind. They do not exclude a drop in oil prices to 70 to 80 dollars a barrel.
22 May 2008
Valery Nesterov
http://www.ruvr.ru/main.php?lng=eng&q=27384&cid=57&p=22.05.2008 (in Russian)
Voice of Russia World Service
Editor’s Note:
Good-sense from Russia! Note well that the Russians observe that even OPEC knows that the present oil-price spike is artificial in many ways; it is the contemporary equivalent of the South Sea Bubble. Of course, there are three reasons not usually mentioned in the mainstream press for the situation.
Firstly, the overly-prolonged US presence in Iraq is one of the major factors. If the US were to withdraw its troops, the Iraqi forces would get very good very quickly. The Iraqi government wishes to survive, and they would cull out incompetents ruthlessly. It is that simple. If the US were to leave Iraq, the situation would stabilise within the year. True, it would be rather nasty and bloody for six months. American liberals would wring their hands and scream of a “humanitarian disaster”. However, the present government would fight for its life, and probably win, as most of the technically-trained folks would not wish to see a Taliban-style theocracy. There would be low-level insurgency in the hinterlands, but, that is normal for that part of the world, like it or no. Rest assured the oil facilities would be guarded with vigilance. To expect American-style “democracy” in Iraq is asinine, and such Wilsonian nonsense should be crushed out wherever it raises it head (as in the media, for instance).
Secondly, its not the oil companies to blame, it is the oil speculators on the futures markets. True, the oil companies are profiting from this situation, but people such as Maxine Waters who wish to nationalise the oil industry are dim and idiotic. Would you wish an oil refinery run on civil-service rather than on commercial lines? YOW! That’s an ecological catastrophe waiting to happen! Certainly, the speculators need to be reined in, probably by a discreet warning of new regulation. THAT usually suffices to cool the jets of the greedy traders. Note well that the Russians do not expect the high prices to last; they are not banking on it. However, futures traders are generally short-sighted folk who get the shaft as often as they get the profits. Many of them shall be ruined when the oil-price bubble bursts. Good riddance to bad rubbish, I say, and I shan’t shed a tear.
Thirdly, is the horrid economics policy followed by the Clinton and Bush administrations. Yes, believe it or not, there was not much difference between Bill and George. Both were drunk on the after-effects of the end of the Cold War, and both have been running an unrealistic circus based on the assumption that the US shall have no rivals on the scene. This is why the Bush administration is so bitter towards Russia. If Russia follows its national interest… that calls for an American response does it not? Such responses cost money, and the post-1991 habit of cutting the forces to the bone would have to end. In addition, the Bush administration is trying to fight a war (albeit a “small” one) and cut taxes at the same time!
As a result, the dollar has been in free-fall, and that is another reason for the rise in oil prices. The Canadian dollar was once 0.71 USD (that was an exchange rate I got in ’02), now, it is 1.01 USD. At the start of the Bush presidency, there were 30 Russian roubles to the dollar, today; it is 24 to the dollar. It appears the dollar is losing against other major currencies as well as a result of the Bush/Clinton opium dream. If we wish lower oil prices… time to break the crack-pipe, I say. We need to treat Bill Gates and Donald Trump the same way that Vladimir Putin treated Roman Abramovich. When the latter starting going against the national interest, well… VVP sent him away as governor of Chukhotka (in far eastern Siberia, for them not in the know). I predict that Mr Abramovich is going to BEHAVE once he returns to Moscow! If we could only send some of our oligarchs to serve as governor of the Aleutians…
