World Need Cheap Oil – American Experts

Oil&Gas Materials 28 April 2008 13:20 (UTC +04:00)
World Need Cheap Oil – American Experts

Azerbaijan, Baku, 28 April /corr. Trend A.Badalova / The oil prices are continuously setting up new records. Recent event which led to the sharp rise of prices was an incident in the Persian Gulf between the military ship of the USA and two Iranian patrol cutters. After the military ship of Iran opened preventive fire at two approaching patrol cutters with Iranian flag, prices in the world oil market rose to $118 per barrel.

Many experts connect the oil price increase in 2008 with the ongoing weakening of the USD. The U.S. Government's announcement to decrease the crude oil reserves has significantly impacted the price increase. However, the price increase may be beneficial for the producers. Thus, in his recent statement, the President of Iran, Mahmoud Ahmadinejad, said that the current oil prices, which are at the highest level in the history of oil sector, are indeed very low. According to him, considering that the oil is a strategic product, there is a need to sell it according to the relevant prices.

The American analysts questioned by Trend considered that the world economy does not need further increase of price for the energy resources.

Thus, according to the oil expert of the U.S. Energy Security Analysis (ESAI), Andrew Reed, the high oil prices are not interesting for oil-producing countries. Reed told Trend that the high oil prices would lead to decelerate in the world economy and it would bring general declining in the energy demand.

"Many oil producing countries understand that slowdown in the world economy may reduce the price inflation of the oil. Continuation of the high oil prices will cause further fall in the worldwide economic growth. In its turn, it will weaken the demand and the oil prices will drop automatically, which will not satisfy the oil producing countries," Reed said.

According to the international economist of the US Energy Information Agency (EIA), Nasir M. Khilji, the high fuel prices can not be beneficial for the USA.

"Almost 50% of fuel is being imported by the USA, $1 increase in the price causes the issue that 50 cents of this cost remains outside the USA for producer," the American economist told Trend .

From mid March to mid April, the average volume of oil imported to the USA made up 9.243mln barrels per day, 1.035mln barrels or 10.1% less than the relevant period of the last year.

Low prices for the commodities, according to Khilji, is a positive factor for the economy, as high living standards are observed in such situation. "The problem which the domestic consumers and producers face is instability rather than the high prices," Khilji said.

Neil Gamson, another economist from EIA, stated to Trend that the high oil prices and weakness of USD are defined by demand and supply.

Pavel Sorokin, analytic from the oil and gas sector of the company UniCreditGroup, sticks to another point of view. According to Sorokin, low oil prices are not beneficial for manufacturers where the political factor plays key role.

"Manufacturers are not interested in low prices only for benefits, as easily accessible oil is very little and huge investments are required to fill the reserves," the analytic stated to Capital.

Sorokin believes that there is no prerequisite for cheap oil in the near future due to the growth of demand and drop of supplies.

"The United States and Europe will be satisfied with $60-$70 prices for barrel, as it will stimulate the economic growth and decrease the inflation, but it is impossible to predict the future," Sorokin stated.

Prices for May future North Sea oil of Brent brand has made up $116,34 per barrel in the London-based market IСE.

Prices for June oil futures made up $118.49 per barrel in New-York based market NYMEХ.

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