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Oil prices to remain high
Shrinking output, geopolitics factors
Kevin G. Hall, Knight Ridder Newspapers Detroit Free Press
WASHINGTON — Oil prices are near last summer’s record high, amid concerns about supply disruptions, and energy forecasters think volatile geopolitics and declining oil production will keep prices up for years.
Oil closed at $66.63 per barrel Friday on the New York Mercantile Exchange. Prices have soared amid concerns about disruptions in Nigerian oil production and a possible political showdown over the nuclear ambitions of Iran, the second-biggest exporter in the Organization of Petroleum Exporting Countries oil cartel.
Oil prices are approaching last year’s all-time high of $70.85 a barrel, the price that came the day after Hurricane Katrina’s landfall on the gulf coast, and U.S. consumers are feeling the shock at the gas pump again. In Michigan, a gallon of regular gasoline averages $2.635.
Global oil production is straining to keep pace with demand. That makes oil traders fear supply disruptions and bid up prices for assured future delivery. The balance between supply and demand will remain tight for several years and the situation is expected to keep fuel prices high, experts at the Energy Information Administration’s annual outlook meeting predicted last week.
(3 April 2006)
Will Iran’s nuclear standoff cause a world energy crisis?
A F Alhajji, Middle East Economic Survey
It is not in Iran’s interest to cut off oil production under any circumstances, so it is unlikely that it will cut or reduce oil exports. Still, it was not in the interest of the US to invade Iraq, yet it did so anyway. It was not in the interest of Iran to reduce its production from 6mn b/d before the revolution to 3.5mn b/d after it, yet it did. Common sense does not always prevail. Iran’s leaders might overlook long-term consequences to garner short-term public support or achieve certain domestic religious goals. There are all kinds of possibilities and scenarios. For example, the government might announce an export cut just to calm the Iranian streets, even if it does not intend to cut exports. Several experts believe the aim of Arab governments that participated in the embargoes of 1956, 1967, and 1973 was to placate public opinion and curb the attacks of Arab nationalists against them.1
Even without a reduction in Iranian oil outputs, news of sanctions or an air strike would immediately increase oil prices by several dollars, but only for a short period. Panic would prevail until traders realized that oil supplies were abundant. If Iran in fact reduces its oil exports, the impact on prices will depend on specific factors…
This article was written for MEES by A F Alhajji, George Patton Chair of Business and Economics at the College of Business Administration, Ohio Northern University.
(3 April 2006, found by Leanan.)
Iran vows that oil prices will not go down
Jerome a Paris, European Tribune
We’ve been discussing the possibility of some form of war or conflict with Iran repeatedly, and the oil markets have certainly taken notice of the “increased chatter” on that topic.
Together with the ongoing unrest in the oil producing provinces of Nigeria, the market was unpleasantly surprised by the test by the Iranian Navy of a new ultra-rapid torpedo, seeing it as both an escalation of the crisis by the Iranians (thus increasing the likelihood of conflict), and a very serious threat to supertanker traffic in the Persian Gulf.
Prices went up by 2$ in an instant, not an unsignificant jump, and bringing them at their highest ever, barring a couple of days after Katrina struck.
But the most worrying is probably the declaration by the Iranian vice-Minister for oil:
Mohammad Hadi Nejad-Hosseinian, Iran’s deputy oil minister, yesterday hinted at Iran’s ability to influence the oil price when he said: “Any fall in oil prices this year is unlikely…A sum of factors show that prices will not fall in the next two or three years unless there is a conspiracy against oil.”
…This looks very much like a show of muscles by Iran, and a very clear indication that they are warning the White House as explicitly as they can that thye have weapons available to retaliate to any attack:
(i) the ability to sink supertankers, and possibly US Navy ships;
(ii) the ability to keep oil prices high (and, this is not said, but it is true, a lot higher if need be).
We’ve all heard the arguments that this White House has a logic of its own and will not be stopped by such “facts on the ground”, and will keep on pushing for a confrontation, but the Iranians are throwing down the gauntlet and effectively telling the chimperor that he is naked. What will he do?
(4 April 2006)
Also posted at Daily Kos.
Related: Iran again (The Oil Drum)
Germany announces new energy plan
Honor Mahony, EU Observer
The German government announced a new energy plan for the coming years following a meeting of political and industry leaders on Monday evening.
Under the plans, up to €2 billion more will be spent on energy research while more than €30 billion is expected to be invested in building new power plants and distribution networks.
Industry is also to invest €33-€40 billion in renewable energy sources such as wind and solar power.
“We all agreed that the goal must be to gradually reduce our dependence on energy imports and to prevent a rise in energy prices,” chancellor Angela Merkel said after the meeting, according to German media reports.
However, nuclear energy remains a divisive issue for the grand coalition of conservatives and social democrats in government.
(4 April 2006)
Oilman urges dear oil for West, cheap for Africa
William Maclean, Reuters
ALGIERS – Africa oil producers should consider creating a two-tier pricing system that would raise prices for Western customers and lower them for poor African consumers, a Namibian energy executive said on Monday.
Joe Vatanavi Mazeingo, managing director of Namibian state-owned oil company NAMCOR, added in a Reuters interview that African oil producers should follow the example of Hugo Chavez, President of OPEC member Venezuela, who provides cheap oil to impoverished Latin American neighbours.
(4 April 2006)