Nigeria threat pushes oil over US$50

LONDON: Oil prices raced to new record highs above US $50 yesterday as rebel threats against Nigerian oil facilities threatened to inflict more strain on global supplies. US light crude touched a high of US$50.47 a barrel before easing to US$49.80, up 16 cents on the day. London’s Brent crude set a new peak at US$46.80 a barrel, and was trading at US$46.23, up 30 cents. Oil has grabbed the financial market spotlight this year, surging 55 percent as rising consumption and the fallout from years of under-investment in supply infrastructure, tempts heavy buying from big-money funds. Producers are pumping at just about full tilt to feed demand as China’s economic expansion powers the fastest growth in 24 years. Worries about supply security in Saudi Arabia, Iraq and Russia have magnified the price surge.

Prices hit new highs after rebels fighting for self determination in Nigeria warned oil companies to shut production in the Niger delta before they declare an all-out-war on October 1. Companies working in the delta shrugged off the threat. Royal Dutch/Shell and Italy’s Agip, a unit of ENI, said they saw no reason to stop oil operations. Shell has already cut 30,000 to 40,000 bpd due to security curbs. So far global economic growth has withstood the impact of higher energy costs. In real terms, stripping out the impact of inflation, oil prices are now near levels hit during the Arab oil embargo of 1973-74, though much lower than the record US $80 annual average high after the 1979 Iranian revolution. “Oil may still be cheap. If crude had merely kept pace with the increase in the ex-energy consumer price index since 1980, it would be trading at US $95 a barrel right about now,” said Merrill Lynch bank in a research report. “This will ultimately prove to be a painful transition — it’s already starting,” the report added. The big question now is whether prices will push higher still. European Union energy commissioner Loyola de Palacio said the pressure on prices would ease after the US presidential election in November. (Reuters)

Senior economist:
Build Stabilisation Fund with oil money

AS the price of oil jumped to an all-time high of US$50 per barrel, senior economists and oil producers are calling on government to establish a “reserve” or “rainy day fund” to boost the country’s Stabilisation Fund. Speaking to Newsday yesterday on the heels of news that the world price of oil had crossed the US$50 a barrel mark, senior economist Dr Dhanayshar Mahabir noted that the Stabilisation Fund now stands at approximately TT$3 billion. Dr Mahabir is however challenging Government to increase the fund to equal its total revenue, which is approximately TT$20 billion. Dr Mahabir is  an economics lecturer at UWI in St Augustine, and a previous consultant to the government

He advised that government establish a petroleum taxation regime which can work “quickly and speedily” to see that it can get more out of the US$50 a barrel. “When government achieves its surplus target, it can spend the returns to benefit the rest of the population,” he said. As for the effects of inflation that could result from fluctuating foreign currencies with the rise in the price of oil, he felt that the Central Bank has policies capable of reducing possible inflation which is currently hovering around four percent. Also commenting on the increase, a senior official at the Mora Oil Ventures Ltd noted that the increase would definitely have a positive impact on the economy, but on the other hand, it could also mean severe backlash from downstream enterprises.