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High time for a single GCC currency
Emilie Rutledge, Al jazeera
There has been a fair amount of scepticism towards the proposed Corporation Council for the Arab states of the Gulf single currency, not just in terms of the likelihood of it actually being launched but also with respect to the economic benefits it is expected to provide. …
Even more significantly if, post-currency union, the GCC decided to allow the purchase of oil in euros along with the Gulf dinar and other currencies, they would see their euro assets appreciate massively, as a greater number of oil-importing nations would hold higher levels of euros in reserve and therefore increase its value. Iran’s decision to open an oil and associated derivatives market in March 2006 is interesting, not least because it plans to invoice contracts in euros, not dollars. …
A strong, independent, single GCC currency is likely to attract increased levels of foreign direct investment to the region and facilitate the invoicing of some oil and gas sales in Gulf dinars. Not only would this provide the region with substantially higher seigniorage revenues but it would also result in the Gulf dinar becoming, albeit a minor, reserve currency with a host of associated benefits, especially for the region’s non-oil financial sectors.
The currency could well be viewed by some Arab and Islamic states as a more “acceptable” reserve currency than that of the US dollar. The notion that it would be too difficult to set up a market for invoicing oil sales in any currency other than the dollar is quite frankly ridiculous, and is largely being propagated by those with a vested interest in the current petrodollar hegemony.
Emilie Rutledge is an economist with the Gulf Research Center in Dubai.
Recently by same author: Is Iraq war fuelling GCC’s economic boom?
(29 September, 2005)
Cautious article that eventually provides a rounded view.-LJ
Russian oil producers to freeze gasoline prices until year-end
Associated Press
Russia’s major oil producers agreed at a meeting with Industry and Energy Minister Viktor Khristenko Sept. 19 to freeze their domestic gasoline prices until the end of the year, the Interfax news agency reported, citing the minister’s spokesman.
“The result of the meeting was a voluntary decision by the management of Russia’s largest oil companies; prices won’t rise any further on the domestic market until the end of the year,” Interfax quoted spokesman Stas Naumov as saying. Lukoil, the biggest Russian crude oil producer, confirmed it had capped gasoline prices with immediate effect until the end of the year. But no other companies made a similar announcement.
One major oil company, TNK-BP, which is a 50-percent joint venture with British oil giant BP, declined to confirm the price freeze, but said it would make an announcement Sept. 20. “We support the government’s efforts to ease up tensions on the fuel market,” TNK-BP spokeswoman Marina Dracheva told The Associated Press. …
In neighboring Ukraine, an acute fuel crisis erupted in May after the government imposed a gasoline price freeze, accusing Russian oil companies who control 80 percent of the market of collusion over a sharp rise in gas prices. The measure caused filling stations to run dry as major Russian oil exporters reduced supplies to Ukraine. …
(20 September, 2005)
Fueled again
Burtman, Indyweek.com
Whenever gas prices spike at the pump, explanations abound. Media stories invariably include soothing comments from self-serving economists and industry officials and rarely deviate from a predictable path that can be summed up in a few sentences: The supply of gas was disrupted, and price hikes are just the free market at work regulating supply and demand. A few unscrupulous retailers might be gouging, but no widespread abuses are evident. The price will regulate itself downward when supplies return to normal. Barrels of crude have hit a record high, and OPEC has something vague to do with our problems. And by the way, gas prices are still cheap compared to what they were in the past when adjusted for inflation.
The reports might just as well add a disclaimer: This issue is ultimately far too complicated for you to understand, and we don’t really get it, either. Like figuring out how airlines set their fares from day to day and city to city, deciphering the gas pricing code does in fact pose a challenge beyond the reach of most mortals. That’s one reason why repeated investigations into illegal profiteering by major oil companies have come up empty. A fresh probe of the petroleum industry by the Federal Trade Commission in the wake of Hurricane Katrina might as well have been announced on Comedy Central.
But at least a few elements of the equation can be identified with some degree of confidence. And they put the lie to the simplistic analyses that flow so freely from the Fourth Estate and the vested interests.
(28 September, 2005)
Rupiah ills and oil costs eat into Indofood profits
Reuters via
A downturn in the rupiah and staggering oil prices are catching up with one of Indonesia’s largest corporations.
Indofood Sukses Makmur, the world’s biggest instant noodle maker, said it plans to cut jobs and unpopular flavors as competition in Indonesia and a slump in the currency erode profit.
Indofood fired 2,000 workers in the past year and may cut a further 1,000 jobs, vice president director Franciscus Welirang said.Indofood, whose noodles include flavors such as chicken curry and meat balls, will “stop producing flavors that don’t sell well in the market,” he said.
Indofood’s Indomie, Sarimie and Supermie brands are losing sales to lower-priced noodles from rivals such as the Wings Group. The rupiah’s 8.1 percent decline against the dollar this year has raised raw material prices and the cost of paying back foreign currency debt. Slowing economic growth amid higher global oil prices is also hurting demand. …
(14 September, 2005)
Was Jimmy Carter right?
Some suggest solar power and fuel efficiency weren’t pushed enough
Stephen Koff, Cleveland Plain Dealer
Washington- President Bush is telling Americans to go easy on energy, use carpools and “curtail nonessential travel” – an unusual moment for an administration that used to say it could meet growing energy demand by expanding supply, not consuming less.
But this is not a Jimmy Carter, turn-down-the-thermostat, late-1970s moment.
Carter wore a cardigan when asking Americans to bear a little discomfort in a time of severe oil price increases. Last Monday, Bush rode in a motorcade – two limousines, three utility vans, six SUVs and a medical truck – to the climate-controlled Department of Energy, where he appeared in a suit and tie behind a podium. …
Had Reagan not squashed it, the research that Carter started could have triggered a substantial shift to solar, wind power and other renewable forms of energy – possibly providing as much as 25 percent of the nation’s electricity supply, says Hayes, the Carter solar expert.
“We were all aware of what in theory could happen by the year 2000, and it occasionally comes back and haunts us,” Hayes said. That is all hypothetical, of course, because the theories never got a chance to run their course. Yet solid data exist on what happened after the free market-loving Reagan chopped Carter’s programs to shreds.
(2 October, 2005)
A New Frontier
Being President in an Age of Limits
Bruce J. Schulman, Washington Post
Last week President Bush — who has made his 1,600-acre Texas ranch and its seemingly boundless horizons a symbol of his presidency — asked the nation to recognize some limits.
Trading in his rugged individualism for a summons to collective restraint, this former oilman and avatar of the nation’s long-standing faith in endless abundance asked Americans to join car pools and run appliances at off-peak hours. “We can all pitch in by using — by being better conservers of energy,” Bush said in response to a reporter’s question, pledging to make the federal government a role model in this regard. …
Bush’s appeal for national sacrifice represents more than a tweaking of energy policy; it reflects a broader shift in the president’s — and the nation’s — sense of what’s possible, and what isn’t. For all of his efforts to convey the can-do spirit, Bush reluctantly finds himself echoing the much-maligned pronouncements of the Carter era. He’s stuck in a new age of limits. …
Most important, the president’s post-Katrina appeal to civic virtue recognizes limits on the ability of the unfettered marketplace to solve the nation’s pressing problems. …
(2 October, 2005)
There will apparently be some new initiative coming from the Whitehouse this week, but nothing at this time.-LJ
