Oct
25
Palm oil dives 5.5pc
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Malaysian crude palm oil futures tumbled 5.5 per cent on Thursday, dragged down by faltering US and Chinese soyoil markets as well as fears of slower exports, traders said.
The benchmark January contract on the Bursa Malaysia Derivatives Exchange fell as much as 86 ringgit to 1,479 ringgit ($417.3) per ton in the first few minutes of trade.
Most soyaoil futures on Dalian Commodity Exchange hit limit down while US soyabean oil for December delivery fell 0.6per cent.
Malaysian palm oil exports have been slowing significantly in part due to defaults from top buyers China and India and a general weakness in global demand fuelled by a looming recession.
Exports of Malaysian palm oil products for Oct. 1-20 fell up to 10.2 per cent to around 720,000 tons, cargo surveyors have reported.-Reuters
Oct
24
Will the US Buy into Cuba’s Oil Find?
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For decades, the only promise most Cubans saw in the ocean north of their island was the current that carries homemade rafts to Florida. That all changed a few years ago when geologists estimated that between 5 billion bbl. and 10 billion bbl. of oil lie beneath the waters off Cuba’s northwest coast. Suddenly it seemed as though the hemisphere’s sole communist nation might finally end its desperate dependence on oil-rich allies like the former Soviet Union and Venezuela - and perhaps even escape its impoverished economic time warp altogether.
Washington’s own Cuba time warp got a jolt as well. The oil discovery has renewed debate over whether a crude-thirsty U.S. should loosen its 46-year-old trade embargo against Cuba and let yanqui firms join the drilling, which is taking place fewer than 100 miles off U.S. shores. Despite the Bush Administration’s hard line on Cuba, Republicans in Congress have proposed legislation to exempt Big Oil from the embargo. That clamor is sure to rise - especially if Barack Obama, who is more open to dialogue with Havana, becomes the next President - now that Cuba’s state oil company, Cubapetroleo, or Cupet, has announced a stunning new estimate of more than 20 billion bbl. bubbling off its shores. “This is not a game,” Cupet’s exploration manager, Rafael Tenreyro, assured reporters in Havana last week.
If true, those potential reserves could make Cuba a major petro player in the hemisphere. (The U.S. has reserves of 29 billion bbl.) And it could render the embargo an even more ineffective means of dislodging the aging Castro brothers, Fidel and current President Ra[a {u}]l. “If it really is 20 billion, then it’s a game changer,” says Jonathan Benjamin-Alvarado, a Cuba oil analyst at the University of Nebraska-Omaha. “It provides a lot more justification for changing elements of the embargo, just as we did when we allowed agricultural and medical sales to Cuba” a decade ago.
But is the Cuban calculation really on the level? Skeptics ask if the 20-billion-bbl. estimate is just a ploy to rekindle investor interest, at a time when falling oil prices could make the maritime find less attractive to the potential international partners Cuba needs to extract the oil. The effort is all the more urgent, they add, because reduced oil revenues could also make friends like left-wing Venezuelan President Hugo ChÁvez less able to aid Cuba with cut-rate crude shipments and capital to improve the island’s aged refineries. “The Cuba numbers from my point of view are not valid,” says Jorge Pinon, an energy fellow at the University of Miami and an expert on Cuba’s oil business. “I think they’re feeling a lot of pressure right now to accelerate the development of their own oil resources.” Benjamin-Alvarado gives Cuba’s geologists more benefit of the doubt; but he calls the 20-billion-bbl. estimate “off the charts.” “I trust them as oil people, and their seismic readings might be right,” he says, “but until we see secondary, outside analysis, this is going to be suspect.”
The U.S. Geological Survey (USGS), a government agency, made the initial estimate of 5 billion bbl.to 10 billion bbl. for Cuba’s northwest offshore sector (known as the Exclusive Economic Zone, or EEZ) in 2004. Tenreyro says Cupet’s analysis is based on what he calls a more accurate comparison of similar maritime oil fields like those off Mexico’s Gulf Coast. “We’re talking about that magnitude,” he argued last week. “We have more data” than the USGS. But Cupet, an arm of Cuba’s ultra-secret communist government, hasn’t offered much more evidence than that. Chris Schenk, who as USGS coordinator in the Caribbean led the 2004 survey, agrees that Cuban geologists “are very good.” But he adds, “We would like to see more data.” Still, Schenk notes, because of the embargo and Havana’s insular information policies, “we can’t converse with the Cubans.”
The Spanish energy company Repsol-YPF has entered into a production-sharing agreement with Cupet and is scheduled to start drilling the first real well in the EEZ next year. Other international firms, including Norway’s StatoilHidro and India’s Oil & Natural Gas Corp., are part of the Repsol-led consortium. Venezuela’s state-run Petroleos de Venezuela is considered a lesser player because it has little deep-water drilling experience. (China is also interested but so far only involved in onshore drilling in Cuba.) Cuba is now in important negotiations with Brazil’s Petrobras, which just made its own multibillion-barrel oil find off its coast near Rio de Janeiro and could, analysts say, be the major offshore drilling partner for Cuba if it jumps in.
Still, the concessions so far represent less than a quarter of the 59 drilling blocks that Cuba hopes to exploit in the 43,000-sq.-mi. (112,000 sq km) EEZ. Analysts say one reason is the daunting infrastructural difficulties facing any company that drills in Cuba: firms have to bring much more of their own capital, equipment, technology and on-the-ground know-how than usual. This year’s severe hurricane damage in Cuba has made the situation worse. Canada’s Sherritt, in fact, recently dropped out of its four-block contract. “Who else is going to be willing to actually come in and take the risk in Cuba?” says Benjamin-Alvarado. “In terms of proximity and technology, the only people really able to do it to the extent the Cubans need are the Americans.”
Cuba now produces about 60,000 barrels of oil per day (BPD) and consumes more than 150,000 BPD. (It also produces natural gas.) Venezuela makes up the difference by shipping almost 100,000 BPD to Cuba. The University of Miami’s Pinon says the more serious issue is refining capacity: even if Cuba has only the low estimate of 5 billion bbl. - which could yield more than 300,000 BPD - it needs Venezuela’s investment to upgrade refineries like the Soviet-built plant at Cienfuegos. But plummeting crude prices mean that ChÁvez may have a lot less wealth to spread around for his petro-diplomacy projects. “Like the collapse of the Soviet Union,” says Pinon, “this kind of thing has always been Cuba’s Achilles’ heel.”
Sep
26
Oil prices slip after historic one-day gain
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Oil prices fell on Tuesday in choppy trade marked by profit-taking one day after New York crude soared more than $16 in its biggest-ever daily jump.
The massive price gain on Monday was driven partly by hopes that a massive US bailout plan for the banking system would also bolster the global economy and thus maintain strong demand for energy.
The rally was also driven by technical factors because the contract for New York oil deliverable in October had expired on Monday.
On Tuesday at 1600 GMT, New York’s new main contract, light sweet crude for November delivery, showed a loss of $2.37 at $107 a barrel.
The October contract had soared $16.37 a barrel to close at $120.92 on Monday after hitting an intra-day high of $130.
Oil had also been buoyed by the weak US currency, which makes dollar-priced oil cheaper for buyers using stronger currencies, stimulating demand.
Monday’s price gains in New York exceeded the previous record one-day rise of $10.75 on June 6.
Meanwhile, on Tuesday, Brent North Sea crude for November dived $2.61 to $103.43 a barrel. It had jumped $6.43 on Monday.
“Oil was lower on Tuesday, correcting after Monday’s meteoric and historic rise, with concerns about the US toxic debt bailout plan growing,” said Michael Davies at the Sucden brokerage in London.
“There are many, including us, who feel that the optimism we have seen since news of the plan broke last Thursday is unfounded.
“The US plans are still far from certain and will not help the damage to the real economy already done by the recent turmoil, which we are yet to see.
“Also, the longer the plans take to be finalised, the more uncertainty will grow, with many expecting no outcome until next week as policy makers argue over the proposal,” said Davies.-AFP Source
Sep
7
Saudi oil move seen crucial to price outlook
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The next Saudi Arabia’s move on its crude output strategy is eagerly awaited. With prices under pressure and calls from within Opec to have a close look at its current output practices, the Saudi stance on the issue remains crucial. The guessing game is hence on.
Riyadh meanwhile has kept its cards close to chest tactically avoiding any public position on the issue. The global energy fraternity thus remains on tenterhooks.
There is a growing feeling now that at Opec’s September 9 meeting in Vienna, Saudi Arabia may increasingly come under some pressure from within the Opec ranks to curtail its output so as to prevent any steep fall in crude prices.
Saudi Arabia has been underlining at the highest level its commitment, will and the ability to meet the growing needs of the market. At the Jeddah energy summit on June 22, the kingdom announced increasing output to 9.7 million barrels per day. The Saudi output was indeed considerably higher than its Opec quota.
As per Platts, the Organisation of the Petroleum Exporting Countries’ 13 members boosted their collective crude oil production by 300,000 barrels per day (b/d) in July to average 32.77 million b/d over the month.
And as was anticipated, in the meantime, the global crude markets started to respond to the rising output, softening the markets considerably. Tropical Storm Gustav notwithstanding, and despite blips here and there, the markets have been comparatively softer.
The extra Saudi and the Opec oil and the visible demand contraction in some of the major global economies in the West have helped prices go down. As per recent reports, the demand in the US, the world’s largest consumer, fell 800,000 barrels per day (bpd) on the year in the first half of 2008, the steepest fall in 26 years.
Similarly, in the world’s third largest consuming country Japan, the domestic oil product demand fell to its lowest in 19 years for the month of July. Oil product sales fell 3.5 per cent from a year earlier to 16.17 million kilolitres (kl), or about 3.28 million barrels per day (bpd), the second month of year-on-year decline, the Japanese Ministry of Economy, Trade and Industry said late last week.
The drop has prompted Opec price hawks Iran and Venezuela to suggest a cut in supplies. However, not every one seems to be toeing the line. Although there are some within the cartel, who may be eager to maximise their return from black gold, there are others too within the cartel looking at things in a broader perspective.
However, there is an interesting twist to this argument. Even if no formal output cut is announced, there is some possibility that some of the leading Opec members, currently producing beyond their quotas, could stifle some of the increased output. That in itself would have some sobering impact on the current market trends, one cannot deny.
Opec’s current production remains much higher than its target, industry estimates say, leaving plenty of surpluses that could be quietly removed should prices or demand fall sharply.
In August, Opec was pumping almost 1 million bpd more than its target of 29.67 million bpd, according to Petrologistics, a consultant which tracks Opec supply.
However, this very debate about the optimal Opec output is closely tied to the issue of the price level that Opec would like to defend. Opec has officially never indicated what price level it would like to defend. There are some indications though that oil has yet to approach a level that would worry Opec.
There are indications that the cartel may not react to lower prices until they fell below $80. In an interview in July, the Saudi King Abdullah was quoted as saying he wanted to see lower prices, though at that stage he did not specify the desired level.
Yet he emphasised that the kingdom was “already unhappy” with the rising price when it was around $100.
And for sure, the price right now is still above $100. Hence there should be no warning bells in Opec capitals at the current levels. And if the above line of argument is to be believed, then the Opec may well refrain from making any formal cut in output. Let’s keep guessing. Opec too enjoys the scenario!
Source
Aug
27
Oil prices rebound above $117
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Oil prices rebounded briefly above $117 on Tuesday, erasing earlier losses as attention switched to a hurricane that could threaten US energy facilities in the Gulf of Mexico, traders said.
New York’s main contract, light sweet crude for delivery in October, jumped $1.72 to $116.83 per barrel, after earlier reaching $117.89.
London’s Brent North Sea crude for October added $1.23 to $115.26.
Oil bounced higher as Tropical Storm Gustav grew into a hurricane on Tuesday.
“Gustav continues to represent a potential threat to oil and gas installations in the Gulf region and will be watched with vigilance,” warned Barclays Capital analysts in a note to clients.
Anglo-Dutch energy giant Royal Dutch Shell meanwhile said it was planning to evacuate some staff from its Gulf facilities because of Gustav.
“Given the current track for Gustav and the expectation that it might enter the Gulf of Mexico this weekend, we are making logistical arrangements to evacuate staff who are not essential to production or drilling operations,” Shell said in a statement.
Aug
20
Prices of ghee, oil decline
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The prices of ghee and cooking oil in the local market have fallen after palm olien rates declined in international market. However, the producers of branded ghee and oil have not reduced their rates.
The price of 16 kg ghee and cooking oil tin plunged to Rs1,950 from Rs2,100 in Punjab two weeks ago.
In Karachi, the rate of 16 kg ghee tin is quoted at Rs1,820 as compared to Rs1,900 on Tuesday.
The palm olien rate fell to $1,000 per ton from $1,200 two weeks back.
Its price in local market also dropped to Rs3,850 per maund (37.25 kg) from Rs4,200 in the last two weeks.
The branded ghee and cooking oil producers also did not pass the impact of the falling palm olien prices in the world market to consumers in March this year.
The Pakistan Vanaspati Manufacturers Association (PVMA) chairman Abdul Wahid told Dawn from Islamabad that the falling crude oil prices had made an impact on various commodities, including palm olien.
He said the 16 kg tin’s rate fluctuates almost on daily basis keeping in view the palm olien rates in Malaysia and Indonesia.
When asked as to why the branded ghee and cooking oil producers, who are also PVMA members, have been reluctant in cutting the rates, he said that being the chairman he urged them to follow suit but so far there had been no response.
He was of the view that the branded product producers might come out with some discount schemes in Ramazan to show their sympathy with the consumers.
According to Mr. Wahid Pakistan consumes 3.2 million tons of ghee and cooking oil per annum, in which the share of oil ranges between 35-40 per cent while ghee holds the share between 65-70 per cent.
He said that the government was still pocketing Rs30 per kg in terms of taxes and duties.
A leading branded product producer ruled out any decline in the prices of 2.5 to 5 litre/kg tins in the coming days by saying that the falling rupee value against the dollar, one per cent raise in GST and income tax, 30 per cent rise in gas prices, higher wages and transportation cost on inflating petroleum prices have nullified the impact of declining palm olien rate on the local rates.
Branded ghee and cooking oil prices have surged substantially in the last two years. In Sept 2006, five kg Dalda ghee tin was priced at Rs395 while it is now quoted at Rs775.
He said as a result of the rising price of 2.5 and 5 kg/litre tins, the market share of one kg pouch, which was five to 10 per cent a year ago, has surged to 30 per cent as consumers prefer to buy smaller quantity as per their requirement.
The packer said that if the palm olien rate would have not fallen then the local rates would have surged by Rs10-15 per kg.
He said that the workers in the factories had been demanding increase in wages after persistent increase in prices of essential items and higher utility, petrol and diesel rates.
Surprisingly, the government had not asked the branded packers as to why the rates had not been brought down despite a cut in palm oil rates in March and in the last two weeks.
A PVMA member said that there was a need to cut the sales tax and import duty on palm oil so that consumers could get an immediate relief. A sizable quantity of palm olien has been arriving from Malaysia following a 10 per cent duty cut on its imports from Jan 1, 2008, under the Free Trade Agreement (FTA) with Malaysia. However, its impact on the price was just Re1 per kg.
Palm oil imports in 2007-08 surged by 3.28 per cent in quantity and 76 per cent in value to 1,766,471 tons ($1.6 billion) as compared to 1,710,437 tons ($916 million) in 2006-07.
According to figures of Federal Bureau of Statistics (FBS), soyabean oil imports also rose by 123 per cent in quantity and 154 per cent in value to 108,382 tons ($103 million) in 2007-08 as compared to 48,492 tons ($140 million) in 2006-07.
Source
Aug
15
Prices of ghee, oil decline
Filed Under Business, News | Leave a Comment
The prices of ghee and cooking oil in the local market have fallen after palm olien rates declined in international market. However, the producers of branded ghee and oil have not reduced their rates.
The price of 16 kg ghee and cooking oil tin plunged to Rs1,950 from Rs2,100 in Punjab two weeks ago.
In Karachi, the rate of 16 kg ghee tin is quoted at Rs1,820 as compared to Rs1,900 on Tuesday.
The palm olien rate fell to $1,000 per ton from $1,200 two weeks back.
Its price in local market also dropped to Rs3,850 per maund (37.25 kg) from Rs4,200 in the last two weeks.
The branded ghee and cooking oil producers also did not pass the impact of the falling palm olien prices in the world market to consumers in March this year.
The Pakistan Vanaspati Manufacturers Association (PVMA) chairman Abdul Wahid told Dawn from Islamabad that the falling crude oil prices had made an impact on various commodities, including palm olien.
He said the 16 kg tin’s rate fluctuates almost on daily basis keeping in view the palm olien rates in Malaysia and Indonesia.
When asked as to why the branded ghee and cooking oil producers, who are also PVMA members, have been reluctant in cutting the rates, he said that being the chairman he urged them to follow suit but so far there had been no response.
He was of the view that the branded product producers might come out with some discount schemes in Ramazan to show their sympathy with the consumers.
According to Mr. Wahid Pakistan consumes 3.2 million tons of ghee and cooking oil per annum, in which the share of oil ranges between 35-40 per cent while ghee holds the share between 65-70 per cent.
He said that the government was still pocketing Rs30 per kg in terms of taxes and duties.
A leading branded product producer ruled out any decline in the prices of 2.5 to 5 litre/kg tins in the coming days by saying that the falling rupee value against the dollar, one per cent raise in GST and income tax, 30 per cent rise in gas prices, higher wages and transportation cost on inflating petroleum prices have nullified the impact of declining palm olien rate on the local rates.
Branded ghee and cooking oil prices have surged substantially in the last two years. In Sept 2006, five kg Dalda ghee tin was priced at Rs395 while it is now quoted at Rs775.
He said as a result of the rising price of 2.5 and 5 kg/litre tins, the market share of one kg pouch, which was five to 10 per cent a year ago, has surged to 30 per cent as consumers prefer to buy smaller quantity as per their requirement.
The packer said that if the palm olien rate would have not fallen then the local rates would have surged by Rs10-15 per kg.
He said that the workers in the factories had been demanding increase in wages after persistent increase in prices of essential items and higher utility, petrol and diesel rates.
Surprisingly, the government had not asked the branded packers as to why the rates had not been brought down despite a cut in palm oil rates in March and in the last two weeks.
A PVMA member said that there was a need to cut the sales tax and import duty on palm oil so that consumers could get an immediate relief. A sizable quantity of palm olien has been arriving from Malaysia following a 10 per cent duty cut on its imports from Jan 1, 2008, under the Free Trade Agreement (FTA) with Malaysia. However, its impact on the price was just Re1 per kg.
Palm oil imports in 2007-08 surged by 3.28 per cent in quantity and 76 per cent in value to 1,766,471 tons ($1.6 billion) as compared to 1,710,437 tons ($916 million) in 2006-07.
According to figures of Federal Bureau of Statistics (FBS), soyabean oil imports also rose by 123 per cent in quantity and 154 per cent in value to 108,382 tons ($103 million) in 2007-08 as compared to 48,492 tons ($140 million) in 2006-07.
Aug
9
Prices of ghee, oil decline
Filed Under Business, News | Leave a Comment
The prices of ghee and cooking oil in the local market have fallen after palm olien rates declined in international market. However, the producers of branded ghee and oil have not reduced their rates.
The price of 16 kg ghee and cooking oil tin plunged to Rs1,950 from Rs2,100 in Punjab two weeks ago.
In Karachi, the rate of 16 kg ghee tin is quoted at Rs1,820 as compared to Rs1,900 on Tuesday.
The palm olien rate fell to $1,000 per ton from $1,200 two weeks back.
Its price in local market also dropped to Rs3,850 per maund (37.25 kg) from Rs4,200 in the last two weeks.
The branded ghee and cooking oil producers also did not pass the impact of the falling palm olien prices in the world market to consumers in March this year.
The Pakistan Vanaspati Manufacturers Association (PVMA) chairman Abdul Wahid told Dawn from Islamabad that the falling crude oil prices had made an impact on various commodities, including palm olien.
He said the 16 kg tin’s rate fluctuates almost on daily basis keeping in view the palm olien rates in Malaysia and Indonesia.
When asked as to why the branded ghee and cooking oil producers, who are also PVMA members, have been reluctant in cutting the rates, he said that being the chairman he urged them to follow suit but so far there had been no response.
He was of the view that the branded product producers might come out with some discount schemes in Ramazan to show their sympathy with the consumers.
According to Mr. Wahid Pakistan consumes 3.2 million tons of ghee and cooking oil per annum, in which the share of oil ranges between 35-40 per cent while ghee holds the share between 65-70 per cent.
He said that the government was still pocketing Rs30 per kg in terms of taxes and duties.
A leading branded product producer ruled out any decline in the prices of 2.5 to 5 litre/kg tins in the coming days by saying that the falling rupee value against the dollar, one per cent raise in GST and income tax, 30 per cent rise in gas prices, higher wages and transportation cost on inflating petroleum prices have nullified the impact of declining palm olien rate on the local rates.
Branded ghee and cooking oil prices have surged substantially in the last two years. In Sept 2006, five kg Dalda ghee tin was priced at Rs395 while it is now quoted at Rs775.
He said as a result of the rising price of 2.5 and 5 kg/litre tins, the market share of one kg pouch, which was five to 10 per cent a year ago, has surged to 30 per cent as consumers prefer to buy smaller quantity as per their requirement.
The packer said that if the palm olien rate would have not fallen then the local rates would have surged by Rs10-15 per kg.
He said that the workers in the factories had been demanding increase in wages after persistent increase in prices of essential items and higher utility, petrol and diesel rates.
Surprisingly, the government had not asked the branded packers as to why the rates had not been brought down despite a cut in palm oil rates in March and in the last two weeks.
A PVMA member said that there was a need to cut the sales tax and import duty on palm oil so that consumers could get an immediate relief. A sizable quantity of palm olien has been arriving from Malaysia following a 10 per cent duty cut on its imports from Jan 1, 2008, under the Free Trade Agreement (FTA) with Malaysia. However, its impact on the price was just Re1 per kg.
Palm oil imports in 2007-08 surged by 3.28 per cent in quantity and 76 per cent in value to 1,766,471 tons ($1.6 billion) as compared to 1,710,437 tons ($916 million) in 2006-07.
According to figures of Federal Bureau of Statistics (FBS), soyabean oil imports also rose by 123 per cent in quantity and 154 per cent in value to 108,382 tons ($103 million) in 2007-08 as compared to 48,492 tons ($140 million) in 2006-07.
Source
Aug
9
Oil prices fall to $114
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Crude prices continued their dizzying spiral down on Friday, shedding nearly four dollars to trade below 114 dollars a barrel as the US currency strengthened amid concerns about energy demand, dealers said.
Brent North Sea crude for September delivery hit an intra-day low of 113.55 dollars a barrel. It recovered slightly to stand at 114.06 dollars, down 3.80 dollars, at about 1420 GMT
New York’s main contract, light sweet crude for September stood at 116.28 dollars a barrel, down 3.74. Oil futures have shed more than 20 per cent in value since hitting record highs above 147 dollars per barrel on July 11.
Oil prices are “getting more and more pressure from dollar strength and it doesn’t seem reversible for now,” said Serge Laureau, commodities strategist at Saxo Bank in Copenhagen, quoted by Dow Jones Newswires.
The dollar struck a five-month high point against the euro on Friday on fading prospects of an interest rate rise by the European Central Bank, dealers said.
A strong dollar makes goods prices in the US unit more expensive for holders of weaker currencies.
In a move that sparked hope of an increase in oil supplies in the future, Iraq said it was resuming exploration activities after a break of nearly 20 years owing to crippling UN sanctions.
Iraq said it hoped to double its proven reserves of crude, adding that it wanted to ramp up output by 500,000 barrels per day from the current average production of 2.5 million bpd, about equal to the amount being pumped before the US-led invasion of March 2003.
Exports of 2.11 million bpd currently form the bulk of the war-torn nation’s revenues, and the oil ministry is keen to raise capacity over the next five years to 4.5 million bpd.
World oil prices had on Thursday risen towards 120 dollars a barrel on news that a pipeline carrying crude from Central Asia to the West would remain shut for about 15 days after a recent explosion.
On Friday, separatist Kurdish rebels claimed responsibility for Tuesday’s blast on the Baku-Tbilisi-Ceyhan pipeline in eastern Turkey which is expected to leave the pipeline shut for two more weeks. Despite modest price gains on Thursday, the oil market has dived lower this week on mounting concern that slower economic growth in the United States would translate into lower global energy demand.-AFP
Aug
6
Iraq’s oil profits huge while U.S. shoulders reconstruction, GAO says
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WASHINGTON - Iraq has benefited handsomely from this year’s surge in oil prices and is well-positioned financially to shoulder a greater share of its own economic and security needs, the U.S. government’s accounting watchdog concluded in a report released Tuesday.
In its report on efforts to stabilize and reconstruct Iraq , the Government Accountability Office steered clear of the politics of who pays for what. But it left little doubt that Iraq , which racked up $32.9 billion in oil earnings from January through June, can afford to pay more for its own reconstruction.
The GAO estimates that Iraq will earn $67 billion to $79 billion in oil sales this year, twice the average annual amount of revenue that it generated from oil sales from 2005 through 2007. This windfall comes despite the fact that Iraq is still struggling to approach pre-invasion oil-production levels.
Record high oil prices mean that Iraq’s government could post a budget surplus of more than $50 billion by year’s end. From 2005 to 2007, oil exports provided 94 percent of the Iraqi government’s revenues.
“This substantial increase in revenues offers the Iraqi government the potential to better finance its own security and finance needs,” the GAO said.
The Iraqi government has run budget surpluses since 2005 that amounted to a cumulative $29.4 billion at the end of last year. Should oil prices remain high, Iraq could post a budget surplus for this year of $38.2 billion to $50.3 billion , GAO researchers concluded.
However, investment spending by the Iraqi ministries that are responsible for oil, water and electricity declined sharply from 2005 to 2007. The GAO said that Oil Ministry spending fell by an annual rate of 92 percent, Electricity Ministry spending by 93 percent and Water Ministry spending by 13 percent. All three ministries affect Iraqi citizens’ quality of life and thus support for the struggling elected government.
While Iraq has amassed budget surpluses, the U.S. Congress has appropriated roughly $48 billion since 2003 for efforts to stabilize and reconstruct the invaded nation. As of this June, the GAO said, about $42 billion of that money had been spent.
Just 1 percent of what Iraq spent from 2005 through 2007 went toward expenditures such as maintaining U.S.- and Iraqi-funded investment in buildings, water supplies and power-generation facilities.
“The Iraqi government now has tens of billions of dollars at its disposal to fund large-scale reconstruction projects. It is inexcusable for U.S. taxpayers to continue to foot the bill for projects the Iraqis are fully capable of funding themselves,” Sen. Carl Levin , D-Mich., said in a statement. “We should not be paying for Iraqi projects while Iraqi oil revenues continue to pile up in the bank, including outrageous profits from $4 a gallon gas prices in the U.S.”
Levin, the chairman of the Senate Armed Services Committee , requested the study in March, along with the ranking Republican on the panel, Virginia’s John Warner . Warner joined Levin on Tuesday in bipartisan criticism of Iraqi budget practices.
“Despite Iraq earning billions of dollars in oil revenue in the past five years, U.S. taxpayer money has been the overwhelming source of Iraq reconstruction funds,” Warner said. “It is time for the sovereign government of Iraq , using its revenues, expenditures and surpluses, to fully assume the responsibility to provide essential services and improve the quality of life for the Iraqi people.”
Before the U.S.-led invasion in 2003, then-Deputy Defense Secretary Paul Wolfowitz declared that Iraq’s oil proceeds would cover the cost of the war and the expense of rebuilding the country after Saddam Hussein was removed from power.
“To assume we’re going to pay for it all is just wrong,” Wolfowitz told the House Budget Committee on Feb. 28, 2003 .
The Bush administration didn’t refute the GAO’s assertions. In a request from the GAO for comment, Deputy Assistant Treasury Secretary Andy Baukol acknowledged that increased oil revenues put Iraq in a stronger position to shoulder its own burdens.
“Nonetheless, the pace of spending has been held back by various factors, including deficiencies in capacity and security,” Baukol, the chief treasury official for the Middle East , said in a written response.
Iraq spent $10.8 billion this year through April, Baukol noted, twice what it spent in the same period last year. The Iraqi government submitted a supplemental budget to the nation’s parliament in July, he added, and the proposal included $8 billion dedicated to capital projects.
Source