[NYTr] Oil, Ever More Dificult: I

[All the News That Doesn't Fit]

Prensa Latina, Havana
http://www.plenglish.com

Oil, Ever More Difficult (I)

by Carlos A. Sánchez

Havana, Jan 1 (Prensa Latina) How long will the rise in oil prices
last? The answer is that it will last until the reserves run dry. The
thing is this crisis caused by new factors points to having more
lasting and deeper effects than expected.

This time it is not a passing crisis like the three-month embargo
declared by Arab countries on fuel exports to the United States, as
main ally of Israel in the Ramadan or Yom Kippur war in 1973, or the
Revolution in Iran that overthrew the Sha (1979-1980) or the outbreak
of the Iraq-Iran war in 1980, or the Desert Storm when Iraq was invaded
by a coalition led by the United States in 1991.

Prices hiked during those conflicts, but just at the beginning of the
Iraq-Iran war did they reach 40 dollars per barrel, a terrifying figure
for that time, but it just lasted a few months. Now studies and
assessments of specialized institutions and an increasing number of
experts in energy affairs, indicated the soaring heights in oil prices
originates in several more extended factors.

Oil became in the 20th Century and still is, the most abundant, cheap,
easy to extract and transport, more massive and most used fuel to
generate electric and automotive energy, besides providing all the
asphalt needed for roads and highways, and number one raw material for
innumerable products of the petrochemical industry.

Now, at the beginning of the 21st Century, prices have soared from
24-25 dollars a barrel in 2002 up to 87-97 dollar-range in November,
2007 and they keep rising.

During the exchange session of November 7, the barrel of crude for
delivery in January, 2008 reached 98.62 dollars for the West Texas
Intermediate (WTI) marker for the US market.

On the 20th of that month, this type of crude jumped again to 98.30
dollars. The following day, at midday, it touched the 99 dollar mark,
although in those days at market closing time, prices fell slightly.

Something similar occurred at the London exchange with the Brent
variety, whose price determines the European market operations. The
Brent reached 97.53 dollars on the 7th and 95.74 dollars on the 20th.

We are speaking of record levels in quotations for both crude types in
November, month when all the world and not only stock operators and
analysts expected the barrel to reach and surpass the 100 dollar-mark.
And after that, what is going to happen?

Well, nothing. Oil prices will creep upward, testing market
resistance.. And it is very difficult to know what the resistance level
will be. There is no lack of supplies in the market due to a whim of
the Organization of Petroleum Exporting Countries (OPEC) in sending
more oil to the market. This entity affirms the market is balanced
where offer and demand are concerned.

And they are probably right. Prices rose to 99 dollars a barrel of 159
liters in the New York market, but for a short while on November 21,
but in the following days they descended to 88 dollars. That means
prices had risen due to an intense speculative activity, more than to a
sharp lack of oil in the market.

The International Energy Agency, which represents the most powerful oil
importing economies, was pressing OPEC for months in 2007 so it would
substantially increase its offer of fuel, but the Organization
attributed the soaring fever to deficit in refining, as well as to
tensions generated by US warmongering against Iran for reasons
recognized as false at the beginning of December, 2007.

Bush administration s aggressiveness against Iran for the alleged
intention of developing nuclear weapons, was and still might be, the
cause for not clearly abandon plans of attack, the second war in less
than five years against a big oil exporter, in spite of the disastrous
outcome observed in occupied Iraq, not only in the political, social
but also economic and military sense.

A situation very near chaos, where everybody loses and the US does not
manage to restore oil wealth exploitation in that country to pre-war
levels.

Even though other factors may concur, the main detonador of the current
hike in prices was the US war on Iraq begun in 2003, only then price
levels shot up until almost 100 dollars a barrel.

Causes of Price Hikes

Among them we could cite like many analysts are doing, the dollar
weakness, currency in which market operations of oil are done
worldwide, factor harming everyone except the United States.

On November 20 precisely, the euro was quoted at 1.4822 dollars, less
than one cent below the revaluation record reached by that currency
during that month against the US dollar.

For oil exporting countries this is no joke, to receive a currency
whose value goes up in smoke almost every day in exchange for its
increasingly valuable and demanded crude.

That s why in the recent 3rd OPEC summit meeting in Ryadh, Saudi Arabia
(Nov.9-11) some heads of state of the 13 member countries -particularly
Iran and Venezuela- proposed to substitute the dollar as base currency
for international oil trade, to which the host nation s leader voiced
his opposition, as his government is very close politically,
economically and militarily to Washington.

Nevertheless, on December 8, high officials of the Tehran government
told reporters that Iran was abandoning the US dollar in its oil
exporting operations, substituting it for euros and also yens.

Other factors causing the upward trend in prices, are the entrance of
China and India to the club of big oil importers to maintain their
impressive growth rates of their economies.

To Continued...

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