[Marxism] Gazprom head: oil will hit $250 per barrel
lnp3 at panix.com
Wed Jun 11 07:23:03 MDT 2008
An ominous warning that the rapid rise in oil prices has only just begun
By Danny Fortson, Business Correspondent
Wednesday, 11 June 2008
The chief executive of the world's largest energy company has issued the
most dire warning yet about the soaring the price of oil, predicting
that it will hit $250 per barrel "in the foreseeable future".
The forecast from Alexey Miller, the head of the Kremlin-owned gas giant
Gazprom, would herald the arrival of £2-per-litre petrol and send
shockwaves through the economy. His comments were the most stark to be
expressed by an industry executive and come just days after the oil
price registered its largest-ever single-day spike, hitting $139.12 per
barrel last week amid fears that the world's faltering supply will be
unable to keep up with demand.
Mr Miller's prediction is well beyond even the most heady market
forecasts, the most extreme of which fall between $150 and $200 per
barrel, and was explained only by vague references to demand from the
developing world. It nonetheless stoked an already febrile atmosphere of
growing public anger across Europe over a soaring fuel cost that is
wreaking havoc at nearly every level of the economy.
The British Government was urging motorists yesterday not to panic-buy
petrol in anticipation of a strike on Friday by lorry drivers who
deliver petrol to forecourts for Royal Dutch Shell, assuring motorists
that contingency plans would ensure sufficient supplies.
In Spain, the regional government of Catalonia enacted an emergency
action plan to bring in fresh food and fuel supplies after nearly half
of its forecourts ran dry and supermarkets shelves were left bare. The
situation was the result of the second day of an "indefinite" nationwide
strike staged by lorry drivers in Spain seeking their government's help
to contain the effects of expensive petrol. Scattered protests by
drivers and fisherman in France and Portugal also continued yesterday.
In a speech to the European Business Congress in Deauville, France, Mr
Miller offered little prospect of relief. He warned that the world was
experiencing a fundamental shift in energy prices that will end at a
"radically new level. We expect that the oil price will approach $250
per barrel in the foreseeable future".
Philip Shaw, an economist at Investec Securities, warned that oil at
that level would exert an extraordinary drag on the economy at a time
when it is already decelerating at a rapid rate. "The word is ouch," he
said. "Forecasts are forecasts though, and I think it should be treated
with some level of scepticism."
The most visible result of $250 oil would be at the petrol pump, which
is already at a record 116.9 pence per litre for unleaded. Because more
than half of that price, about 68p, is due to duty and taxes, the
general rule of thumb is that each $2 increase for oil means a 1p
increase of petrol at the pump. Oil at $250 a barrel would mean an
increase of almost 60p in petrol prices, even before VAT.
The price of everything from food to energy would see significant price
rises. Household electricity and gas bills are particularly vulnerable.
Power companies have begun warning of a second round of major tariff
increases for household bills this year that they say they will need to
push through just to break even.
Mr Miller placed some of the blame on financial speculators for oil's
price rise – it has more than doubled in the past year – but said that
the primary reason is simple supply and demand, driven by the rapidly
expanding countries of the developing world, principally China and India.
It is a view shared by the International Energy Agency. In its monthly
oil report, the developed world's energy watchdog said yesterday that
the "abnormally high prices [for oil] are largely explained by
fundamentals". But whether the price of oil will reach $250 is uncertain
at best. Most expect it to reach a breaking point before that figure.
The IEA said that the high price would eventually "choke off" demand and
a balance between supply and demand would return.
What is certain is that for Europe, Mr Miller's role will become
increasingly important as head of the continent's single biggest gas
supplier. He also warned against "protectionist tendencies" in Europe,
where worries have grown that the company is being used as a blunt
negotiating tool of the Kremlin. "The relationship between Gazprom and
Europeans is one of mutual dependence. We rely as much on European
consumers as they depend on us," he said.
"In all frankness, I am concerned about certain protectionist tendencies
resurfacing in the EU ... How wise it is that the European Commission
invents an 'anti-Gazprom clause' to keep investments which are so needed
for more efficient satisfaction of raising demand."
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