Algeria increases the price of oil

The Algerian Parliament has decided to increase Algeria’s share of oil production revenues by placing an “excess” profits tax on oil shipments whenever oil prices exceed $30.00 per barrel. Algeria, one of Africa’s largest oil and natural gas exporters, will levy the new tax starting in 2007. Depending on total output, the excess profits tax will range from 5% to 50% on the Algerian profits of foreign companies, including Shell, BP, Anadarko Petroleum and Hess Corporation.

The Parliament also signed into law a provision that the country’s oil monopoly, Sonatrach, must take a 51 percent controlling interest in all future production and refining contracts. This, despite the fact that most of the financing and technical expertise for oil and natural gas exploration, production and refining has been furnished by foreign corporations and financial institutions.

Not included in the public announcement:

• existing oil and natural gas contracts are worthless. If a foreign oil company wants to continue its operations in Algeria, it will have to agree to new contract terms;

• it also remains to be seen if these taxes will decrease the profits of the participating oil companies, or increase the price of gasoline, diesel, propane and heating oil fuels.

National mandates to increase the fees and taxes charged against production and refining is happening throughout the world. Existing contract obligations are disregarded at the whim of each nation’s political establishment. This trend guarantees higher prices are a permanent fixture of the world’s oil and natural gas supply chain.

Who will pay the bill?

If we take a holistic approach to the study of oil depletion, this trend is simply another confirmation we are approaching “Peak Oil”. Greed – always a driver of producer nation policy – has now been unfettered by a recognition that oil supplies are both limited and finite.

But there is a significantly more troubling consequence. This trend implies consumer nations will never be able to reach a long term contractual relationship with producer nations for the allocation of earth’s remaining oil and natural gas resources. Producer nations will continue to pursue pricing and production decisions based on their selfish best interest.

Including the quest for greater political power.

Ronald R. Cooke
The Cultural Economist

For more information about oil depletion, see: “The Report On Oil Depletion” at www.oildepletion.blogspot.com