Oil Prices
Editorial: Oil Prices
14 September 2005
AS the price of oil hits a record $70 a barrel, the UK’s finance minister, Chancellor of the Exchequer Gordon Brown, has called on oil-producing countries to make a “concerted effort” to bring prices down.
Brown’s comments cannot be ignored. Until the end of the year when the UK hands over the EU presidency to Austria, he is also Europe’s leading finance minister — not to mention the UK’s prime minister-in-waiting. His concern about oil prices is understandable. The price of petrol and energy in the UK has, as elsewhere, rocketed to an all-time high, prompting intense unease about possible consequences. There is now a distinct air of panic in the UK, as in Europe and the whole of the industrialized and the developing worlds, as costs begin to bite and the realization sets in that recession could be just around the corner.
Brown’s appeal, however, smacks of greed and hypocrisy. The UK is, after all, itself a major oil producer; it could lead the way by offering substantial subsidies to North Sea oil companies to expand production — as he suggests OPEC producers should do. But no. Brown does not feel that the UK should bear any cost in bringing down the price of oil. That goes for tax as well. The cost of fuel in the UK is among the highest in the world; it is now around the equivalent of $1.50 a liter. Over 80 percent of that is tax. Brown could cut the tax but he refuses, even though it would do no damage whatsoever to his budget. Because the tax is based on the oil price, not a fixed amount, he is getting far more than he expected when the budget was drawn up. He could hand that extra bit back to the consumers. That is what the French and some other European governments are going to do.
That is, however, not Brown’s solution. He wants OPEC to rescue the situation — and it is specifically OPEC rather than any of the other producers that he is targeting. He wants it to produce another half million barrels a day. That makes this an issue with Saudi Arabia - because Saudi Arabia is the only OPEC country with the capacity to increase production substantially. In short, the British chancellor of the exchequer wants Saudi Arabia to pay the price of saving the UK from economic crisis.
The answer has to be no. Brown has the means to cut petrol costs in the UK, by cutting the tax. If he is not prepared to make any effort whatsoever to ease the situation — on the contrary keeping as much money as he can — then why should anyone else help?
Rocketing oil prices are not the oil producers’ doing. Saudi Arabia has tried its best to keep prices at sensible levels; it has increased production. Record prices are not in the producers’ interests; they will only speed up moves to alternative energy sources. For that matter, an increase in production is unlikely to make much difference. The price hikes are now entirely dealer-driven, not even market-driven — and a fair proportion of those dealers are based in London, New York, Geneva and all the other places which are now squealing loudest about the price of oil.
14 September 2005
AS the price of oil hits a record $70 a barrel, the UK’s finance minister, Chancellor of the Exchequer Gordon Brown, has called on oil-producing countries to make a “concerted effort” to bring prices down.
Brown’s comments cannot be ignored. Until the end of the year when the UK hands over the EU presidency to Austria, he is also Europe’s leading finance minister — not to mention the UK’s prime minister-in-waiting. His concern about oil prices is understandable. The price of petrol and energy in the UK has, as elsewhere, rocketed to an all-time high, prompting intense unease about possible consequences. There is now a distinct air of panic in the UK, as in Europe and the whole of the industrialized and the developing worlds, as costs begin to bite and the realization sets in that recession could be just around the corner.
Brown’s appeal, however, smacks of greed and hypocrisy. The UK is, after all, itself a major oil producer; it could lead the way by offering substantial subsidies to North Sea oil companies to expand production — as he suggests OPEC producers should do. But no. Brown does not feel that the UK should bear any cost in bringing down the price of oil. That goes for tax as well. The cost of fuel in the UK is among the highest in the world; it is now around the equivalent of $1.50 a liter. Over 80 percent of that is tax. Brown could cut the tax but he refuses, even though it would do no damage whatsoever to his budget. Because the tax is based on the oil price, not a fixed amount, he is getting far more than he expected when the budget was drawn up. He could hand that extra bit back to the consumers. That is what the French and some other European governments are going to do.
That is, however, not Brown’s solution. He wants OPEC to rescue the situation — and it is specifically OPEC rather than any of the other producers that he is targeting. He wants it to produce another half million barrels a day. That makes this an issue with Saudi Arabia - because Saudi Arabia is the only OPEC country with the capacity to increase production substantially. In short, the British chancellor of the exchequer wants Saudi Arabia to pay the price of saving the UK from economic crisis.
The answer has to be no. Brown has the means to cut petrol costs in the UK, by cutting the tax. If he is not prepared to make any effort whatsoever to ease the situation — on the contrary keeping as much money as he can — then why should anyone else help?
Rocketing oil prices are not the oil producers’ doing. Saudi Arabia has tried its best to keep prices at sensible levels; it has increased production. Record prices are not in the producers’ interests; they will only speed up moves to alternative energy sources. For that matter, an increase in production is unlikely to make much difference. The price hikes are now entirely dealer-driven, not even market-driven — and a fair proportion of those dealers are based in London, New York, Geneva and all the other places which are now squealing loudest about the price of oil.
posted by Marcel at 12:34 AM
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