oil related 031007

Hike in oil prices on horizon as world crude prices push higher

Step risks sparking street protests by angry labor unions

By Osama Habib

BEIRUT: Increasing the prices of gasoline and fuel oil will be one of the top agendas of the next government in Lebanon once contending groups reach an agreement on the president of the republic, economist and oil importers said on Tuesday. With the price of the barrel of oil exceeding $81, the current government has avoided raising the prices of gasoline and fuel oil, fearing that this step may trigger widespread protests.

Taxi drivers and trade unions have already threatened to block streets and stage demonstrations if the government makes the decision to raise the prices of oil.

The General Labor Confederation (GLC) has warned that hiking the prices of oil will only "inflame the street."

Bahij Abu Hamzeh, the president of the oil importing association, said the government's revenues from oil and its derivatives have shrunk from LL16,000 per 20 liters of gasoline four years ago to around LL3,000.

"The government is biting the bullet because it is watching its revenues from taxes on oil falling drastically," Hamzeh told The Daily Star.

The government's annual revenues from taxes on oil fell from $1.1 billion to less than $300 million since the prices of oil surged since 2005.

Gasoline and fuel oil are subject to the Value Added Tax (VAT).

"At one point, revenues from oil excise represented a big chunk of the government's revenues and now the amount they collect is very trivial," economist Kamal Hamdan said.

A source, who spoke on condition of anonymity, said the opposition groups will be compelled to seriously consider hiking the prices of oil once a coalition government is established.

"Even the opposition realizes that they can't ignore forever the rise of oil on the international markets but they are too afraid to say anything in order not to loose public support," the source said.

Hamzeh said that if the prices of oil exceed $100 a barrel due to the looming showdown between Iran and the West, the Lebanese government will loose all the revenues from oil.

"I can't imagine what will happen in Lebanon if the oil barrel hits $100. Everybody will lose: the government and the public," Hamzeh said.

He added that Lebanon imports more than 4.5 million tons of oil and fuel oil each year.

Hamzeh does not believe that the Arab oil-producing countries will donate oil shipment to Lebanon.

"Oil is a commodity and cannot be treated as otherwise. The Arab states have no control over the prices of oil in the international market," he said.

Hamzeh said the International Monetary Fund has urged the Lebanese government to raise the prices of gasoline and fuel oil to boost revenues. "This recommendation is part of the Paris III paper and I don't know for how long the government can avoid this issue," he said.

A study prepared by GTZ, a German research center, said that Lebanon has the 40th lowest gasoline and diesel prices in the world. It added that the prices of oil in Iran, Saudi Arabia, Qatar, Bahrain, Egypt, Yemen and Algeria are cheaper because of heavy subsidies.

It added that the Lebanese government capped the price of gasoline in May 2004 due to increasing word prices.

Finance Minister Jihad Azour has said that the government has no intention to raise the prices of gasoline at the moment but declined to say if the next government will take this step.

Source: Daily star

Saudi committed to oil market stability: Naimi

2 October 2007

DUBAI - Saudi Arabia, the world’s biggest exporter, said on Tuesday that it remained committed to stability in world oil markets ahead of a meeting of OPEC heads of state next month.

“The third OPEC summit that will be held in Riyadh comes in the framework of routinely holding the OPEC summit in a member nation,” Saudi Oil Minister Ali al-Naimi said in a statement carried by the official SPA news agency.

“It also affirms the kingdom’s devotion to stability in the world petroleum markets to serve the interests of the producing and consuming countries, the petroleum industry and the global economy, especially the economies of developing countries.”

The Organization of the Petroleum Exporting Countries agreed last month to a 500,000 barrels per day increase in output from Nov. 1. Naimi made no mention of the increase or any predictions for the upcoming OPEC summit, which he said would take place on Nov. 17-18.

Venezuelan Energy Minister Rafael Ramirez said on Tuesday that OPEC should not increase oil production again after November.

Oil fell below $80 a barrel on Tuesday, retreating for a third day as a strengthening dollar and concerns about the world economy prompted investors to take profits.

The price has been above $80 for much of the last three weeks however, despite OPEC’s Sept. 11 agreement to cut.

Naimi said the OPEC summit would focus on energy-saving, environmental protection and global prosperity.

Source: Khaleej Times