In 1970 the official price of Saudi crude oil was fixed at 1.80 dollars per barrel. During the last days, more problems in Nigeria increased concerns over supply, with prices breaching 126 dollars per barrel. Oil has soared 25 per cent since the start of this year and has doubled since the same stage last year, when it stood at about 62 dollars.
Many analysts trust the doubling in oil prices, since this time last year, has much to do with the dollar’s long-drawn-out decline. Others believe tight global supplies of oil, driven by a rising demand in countries such as China, Brazil and India, is the key cause driving oil higher. It looks that global demand has to stay high, as elevated price of oil has kept demand limited in the United States. China had a very cold winter, and so the United States exported a lot of distillate oil, which is used to make home heating fuel and diesel fuel, to the region. Oil can easily hit 150 dollars a barrel if the current demand would continue as it is abroad.
A few days ago, Iran’s Oil Minister Gholamhossein Nozari said it would be possible to see a price of 200 dollars per barrel for crude oil if existing conditions in the market remained the same. Iran is the world’s fourth-largest oil producer and the Organisation of the Petroleum Exporting Countries’ (OPEC) second largest exporter. Without doubt there is a direct relationship, inversely proportional, between the drop in the value of the dollar and hike in the price of oil as crude oil is bought and sold in American dollars around the globe, so the weakening of the American dollar causes the price of oil to increase.
But interestingly enough, as oil prices are ascending to new highs, according to a new survey by KPMG Global Energy Institute, numerous oil and gas industry executives declare that they expect the price to fall significantly by year’s end. Fifty-five per cent of 372 petroleum industry executives believe that the price of a barrel of crude will drop below 100 dollars by the end of this year. Nine per cent said that they expect the price to close the year where it’s been this week hence above 120 dollars a barrel.
Whatever, predicting the price of oil in the future is surely a major uncertainty but one thing is definite – what goes up could come down and oil prices may descend too.
As the price of oil last Thursday reached an all-time high, I couldn’t help myself not to think what would have happened in Malta right now, if the Malta Labour Party were elected to government two months ago. I brought to my mind the irresponsible surcharge proposal Labour was making during the election campaign, saying the surcharge would have been cut by half. I can still remember Lawrence Gonzi telling Alfred Sant that he must be building sand castles to the detriment of our economy, as no one can know what the price of oil is going to be in the future. We can only assume and not predict.
So, with the current price of oil being 126 dollars per barrel, the Labour Party in government would have still reduced the surcharge by 50 per cent? Or would we have had to pay the price through our taxes?
Dear readers, 10 years ago when the Labour Party were in power, the prime minister at that time didn’t have this worldwide problem of continuous mounting price of oil. The price per barrel at that time was of 12 dollars, but yet the socialist government still put water and electricity rates up astronomically, much higher than what they are today. So I can only imagine what a disastrous Malta would have been if we had a Labour Party and an Alfred Sant at the helm of the country today.
Thank God that, while we are facing this international economic situation, in Malta we have someone at the rudder who knows what he is doing. Having said this, let’s hope that this international situation gets better at the earliest possible.
David Casa is a Nationalist MEP
[email protected]
www.davidcasa.eu