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From: [EMAIL PROTECTED]
Date: June 10, 2008 7:42:01 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: CEO of world's largest energy company predicts oil will hit
$250 a barrel
An ominous warning that the rapid rise in oil prices has only just
begun
By Danny Fortson, Business Correspondent
The Independent (UK), 11 June 2008
http://www.independent.co.uk/news/uk/home-news/an-ominous-warning-that-the-rapid-rise-in-oil-prices-has-only-just-begun-844217.html
The chief executive of the world's largest energy company has issued
the most dire warning yet about the soaring the price of oil,
predicting that it will hit $250 per barrel "in the foreseeable
future".
The forecast from Alexey Miller, the head of the Kremlin-owned gas
giant Gazprom, would herald the arrival of £2-per-litre petrol and
send shockwaves through the economy. His comments were the most
stark to be expressed by an industry executive and come just days
after the oil price registered its largest-ever single-day spike,
hitting $139.12 per barrel last week amid fears that the world's
faltering supply will be unable to keep up with demand.
Mr Miller's prediction is well beyond even the most heady market
forecasts, the most extreme of which fall between $150 and $200 per
barrel, and was explained only by vague references to demand from
the developing world. It nonetheless stoked an already febrile
atmosphere of growing public anger across Europe over a soaring fuel
cost that is wreaking havoc at nearly every level of the economy.
The British Government was urging motorists yesterday not to panic-
buy petrol in anticipation of a strike on Friday by lorry drivers
who deliver petrol to forecourts for Royal Dutch Shell, assuring
motorists that contingency plans would ensure sufficient supplies.
In Spain, the regional government of Catalonia enacted an emergency
action plan to bring in fresh food and fuel supplies after nearly
half of its forecourts ran dry and supermarkets shelves were left
bare. The situation was the result of the second day of an
"indefinite" nationwide strike staged by lorry drivers in Spain
seeking their government's help to contain the effects of expensive
petrol. Scattered protests by drivers and fisherman in France and
Portugal also continued yesterday.
In a speech to the European Business Congress in Deauville, France,
Mr Miller offered little prospect of relief. He warned that the
world was experiencing a fundamental shift in energy prices that
will end at a "radically new level. We expect that the oil price
will approach $250 per barrel in the foreseeable future".
Philip Shaw, an economist at Investec Securities, warned that oil at
that level would exert an extraordinary drag on the economy at a
time when it is already decelerating at a rapid rate. "The word is
ouch," he said. "Forecasts are forecasts though, and I think it
should be treated with some level of scepticism."
The most visible result of $250 oil would be at the petrol pump,
which is already at a record 116.9 pence per litre for unleaded.
Because more than half of that price, about 68p, is due to duty and
taxes, the general rule of thumb is that each $2 increase for oil
means a 1p increase of petrol at the pump. Oil at $250 a barrel
would mean an increase of almost 60p in petrol prices, even before
VAT.
The price of everything from food to energy would see significant
price rises. Household electricity and gas bills are particularly
vulnerable. Power companies have begun warning of a second round of
major tariff increases for household bills this year that they say
they will need to push through just to break even.
Mr Miller placed some of the blame on financial speculators for
oil's price rise – it has more than doubled in the past year – but
said that the primary reason is simple supply and demand, driven by
the rapidly expanding countries of the developing world, principally
China and India.
It is a view shared by the International Energy Agency. In its
monthly oil report, the developed world's energy watchdog said
yesterday that the "abnormally high prices [for oil] are largely
explained by fundamentals". But whether the price of oil will reach
$250 is uncertain at best. Most expect it to reach a breaking point
before that figure. The IEA said that the high price would
eventually "choke off" demand and a balance between supply and
demand would return.
What is certain is that for Europe, Mr Miller's role will become
increasingly important as head of the continent's single biggest gas
supplier. He also warned against "protectionist tendencies" in
Europe, where worries have grown that the company is being used as a
blunt negotiating tool of the Kremlin. "The relationship between
Gazprom and Europeans is one of mutual dependence. We rely as much
on European consumers as they depend on us," he said.
"In all frankness, I am concerned about certain protectionist
tendencies resurfacing in the EU ... How wise it is that the
European Commission invents an 'anti-Gazprom clause' to keep
investments which are so needed for more efficient satisfaction of
raising demand."
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