Oil prices have let us down

Expensive raw materials could become a serious problem for Russia

OPEC's decision to raise oil production quotas did not help bring down prices. Last Friday, on the New York Stock Exchange, quotes soared to $58.6 per barrel. This figure is 22 cents higher than the absolute record recorded in early April. A similar situation developed on the London Stock Exchange - a new record was set there at $57.97 per barrel. For Russia, such a seemingly obvious benefit as high prices can turn into a serious problem: the domestic economy will be buried under an avalanche of petrodollars flowing into the country. As Finance Minister Alexei Kudrin noted, the volume of funds received already “many times exceeds the industry’s ability to absorb this increase.”

Oil prices rose throughout last week. On Friday it became known that the situation in one of the OPEC countries - Nigeria. On this day, America closed its embassy and consulate in Lagos due to a “terrorist threat.” Great Britain and Germany followed the example of the States. As Zenit Bank analyst Evgeny Suvorov explains, Nigeria produces mainly light (low-sulfur) oil, which is more suitable than other types for the production of gasoline. “Almost all the raw materials from this region go to American refineries. Whenever there is any shock in Nigeria, there is a fear that exports will decline. This immediately affects the prices of petroleum products, following which raw materials become more expensive,” says the expert.

In general, as experts note, oil prices rose last week due to high demand for petroleum products. Traders are afraid that if it increases, there will simply not be enough oil refining capacity in the world. According to Reuters, over four weeks, gasoline consumption averaged 9.5 million barrels per day (a year ago this figure was 3% lower). Demand for distillates, including fuel oil, increased to 4.1 million barrels per day (6.5% higher than a year earlier). At the same time, it has been repeatedly noted that the utilization of processing capacities in Europe and America reaches 95%, although according to standards it should not exceed 75%. In the United States, no new refineries have been built over the past 30 years, and in Europe since the early 90s.

At last Wednesday's OPEC session, Qatar's Energy Minister Abdullah bin Hamad al-Attiyah said: “The world is not in danger of running out of oil. He is concerned about shortages of petroleum products such as gasoline and diesel due to limited refinery capacity. This is an issue that everyone should pay attention to. OPEC does not have the capacity to solve it.” Based on this position, oil ministers made a formal decision to increase quotas by 500 thousand barrels per day, to 28 million barrels. The market took the news without enthusiasm: OPEC is currently producing 28.2 million barrels of oil per day (excluding Iraq), so virtually nothing has changed.

Now oil companies intend to increase investments in raw material processing. The White House and the European Union are looking for ways to stimulate oil workers, and are also advocating the use of alternative energy sources. However, the development of processing capacity may take more than one year.

Last week, Russian officials already announced that the average annual price of Russian Urals oil has increased. According to Economic Development Minister German Gref, since the average cost of raw materials in January-April amounted to $44.3 per barrel, the price forecast for 2005 was raised from $30 to $43. However, the minister is confident that “in the long term the price will fluctuate,” and in subsequent years there will be a downward trend.

In the meantime, Finance Minister Alexei Kudrin calls for spending the incoming money very carefully. “By starting to use these funds within the country, we increase inflation,” he said, but added. - To the extent that we can afford, we use this money, in particular, to support the Pension Fund. Starting next year, we are increasing the oil cut-off price for the stabilization fund. The volume of growth in the processing industry and the money supply must be comparable.”

Denis REBROV