Oil Prices
The German government
has ruled out scrapping its eco - tax and refused demands for a direct cut in
diesel excise duty. Instead the government considers helping welfare -
recipients hurt by higher petrol and heating oil costs and will offer a package
of social and fiscal measures.
In contrast to
previous oil crises, many experts have no simple explanation for the recent
price rises. The president of the OPEC (the Organization of the Petroleum
Exporting Countries, which produce almost 40 percent of world's oil) said, that
an energy crisis is imminent, if worldwide refining and production capacity
doesn't grow. Ali Rodriguez, Venezuela's oil minister, said OPEC's latest
output quota agreement is enough to meet worldwide crude oil demand, but the
capacity limitations and the sparse production and refining capacity of some
OPEC and non - OPEC countries could block an improvement of the oil prices.
International pressure on OPEC to increase production leaded up to a meeting of
the OPEC in Vienna last weekend. OPEC agreed to raise its target output for the
third time this year (26.2 million barrels a day from 25.4 million barrels a
day). Rodriguez said, that OPEC has spare capacity of more than 2 million
barrels, but several OPEC countries are nearing their capacity ceiling. For
example Norway, which is not a member of the OPEC, but often cooperates with
the organization, has admitted, that its oil wells are already producing up to
capacity. Rodriguez insisted that OPEC's 800000 barrels a day quota increase is
enough to meet worldwide demand for crude oil and called on consuming countries
to increase refining capacity and lower gasoline taxes. He said the principal factor
that increases fuel prices are high taxes, the OPEC estimates that taxes and
refining activities contribute 84 percent of gasoline prices, while the price
of crude contributes only 16 percent. An other big problem which Rodriguez
mentioned was, that falling refining capacity especially in the United States
has created a bottle - neck effect, which prevents finished oil products from
reaching the market in time to meet demand. He said the OPEC is willing to
increase production a fourth time this year if the market calls for it, but
also want to avoid an irrational production increase that could lead to price
crash similar to the one in 1998, which was so drastic, that some OPEC
countries are still struggling to recover from it. Besides crude oil prices
that are at 10 - year highs, leading to spikes in the cost of gasoline and
heating oil, natural gas prices have surged to all - time records. Such
countries as the United States which have shied away from ecologically harmful
energy sources like nuclear and coal - fired power plants are less vulnerable
to oil price swings than 20 years ago, because of their new technology -
oriented economy. Effects like higher pump prices and 20$ surcharges on round -
trip air tickets have been minor, but there are limits to how long the USA can
shrug. Specialists disagree, when they try to explain the reasons of the recent
price rises. The reasons of previous energy crises where easier to explain,
during the 1970s big increases were caused by supply interruptions caused by
the Arab oil embargo during the 1973 Middle East war and the 1979 Islamic
revolution. Now the experts attribute the price rises to high demand caused by
continuing good time in the USA, Europe's growth and a fast recovery in Asia,
which resulted in that the world oil production has being pushed to near
capacity.
The experts also say
that the most debilitating impact will be felt in Asia, because emerging
economies like South Korea and Taiwan still depend on such heavy industries as
steel - production, while the USA and Europe have learned from previous oil
shocks and developed greater energy efficiency. Countries like South Korea and
Taiwan will suffer a drop of 2 percent in their gross national product this
year unless oil prices sink quickly. Experts say, that the low oil inventories
have been a problem, and that refineries appear to have been slow to rev up
production in anticipation of lower world oil prices that have not
materialized, but this also do not completely explain the surge in gasoline prices.
The oil industry blames much of the price spikes this summer on a requirement
for cleaner - burning blend of reformed gasoline. The costs of making the new
gasoline are higher than anticipated because of blending problems. The cleaner
burning gasoline costs the consumers 5 cents a gallon more than conventional
gasoline. In the Midwest the situation is worse, for example in Chicago, where
the prices have jumped 30 cents to 50 cents a gallon. Depleted reserves in many
oil - producing Western countries and continuing speculation in world oil
markets almost guarantee that prices will remain chaotic for the next 18 to 24
months.
