& çâÌæÚUæð´ ·¤è ¥ôÚU Îð¹Ùæ ÁæÚUè ÚU¹ð´ ¥ÍæüÌ ¥ÂÙð ÜÿØ ÂÚU ŠØæÙ ÚU¹ð´Ð ãæÚU Ù ×æÙð´, €UØô´ç·¤ ·¤æ× ·¤ÚUÙð âð ¥æÂ·¤ô ©gðàØ ·¤è Âýæç# ãôÌè ãñ ¥õÚU ÁèßÙ ·¤æ ¹æÜèÂÙ ÎêÚU ãôÌæ ãñÐ ÖÜð ãè ÁèßÙ ×ð´ ç·¤ÌÙè Öè ·¤çÆÙæ§ü €UØô´ Ù ¥æ°, çÁ™ææâæ ¥õÚU ©ˆâæã ÕÙæ° ÚU¹ð´Ð ŠØæÙ ÚU¹ð´, ÜÿØ ã×ðàææ ¥æÂ·Ô¤ Âæâ ãôÌð ãñ´ çÁ‹ãð´ ÂæÙð ·Ô¤ çÜ° ÂýØæâ ¥æÂ ·¤Öè Öè àæéM¤ ·¤ÚU â·¤Ìð ãñ´Ð

Why did the Price of Oil Go up?

by Harun ur Rashid
***It appears that the dynamics of continuing oil production lead to a view that the oil price will continue to be above the equilibrium price of US$20 for the coming years. Oil prices are unlikely to fall at US$11 per barrel.
Those days have gone and the oil-importing countries should be prepared to pay for high oil prices. The adage that what goes up must come down does not appear to be applicable in respect of oil price. ***
THE price of oil has never been a matter solely for the oil-producing countries. The rise and fall of it have profound Implications for all the counties in the world. The new year is marked by the steep price rise from its languishing US$11 per barrel early last year. A week ago the price of oil in the world market hit a nine-year record high at US$30 per barrel.
When the price is low, the oil-producing countries and oil companies suffer. The average income, of the oil-producing countries was estimated to have reduced almost 50 per cent and these nations had both temporary and long-term repercussions. For the oil companies, al US$1 1 per barrel, investment in petroleum exploration and production is not cost-effective and as a result many oil companies were not enthusiastic to invest in the exploration of oil.
When the oil price is high, oil importing countries suffer most as It creates Inflationary pressures and other potentially economic problems. The import bill becomes too high for poorer countries and the economic growth is threatened There is a demand from certain quarters m the US that the Clinton ad ministration should release oil from its strategic reserves lo keep the price low.
The US Secretary for Energy Bill Richardson has’ been occupied with talks with the oil-producing countries to ensure that Ihe price does nol remain
so high. Media reports indicate that Mexico. Saudi Arabia and Gull countries are inclined to increase oil productions to stabilise the world prices in oil over US$20 but not exceeding US$25.
The reasons for the price-rise are important and offer insights into why Jie price rose so sharply.
The' classical theory* says that market mechanisms will adjust price governed bv the laws of supply and demand. Il has been reported that ordinarily the demand for^joil worldwide increases at an average annual rate of 2 per cent. At that rate of increase in demand and with matching supply, experts maintain that an equilibrium price will be at least around US$20 per barre).
The experts believe that (In depletion of existing oil wells is about 10 jx-r cent per year and to produce an extra million barrels per day it requires investment of US$3.5 billion to US$7 billion. It is estimated that the oil companies spend JSS100 billion per year to replace lost production and to meet the in elemental demand. The question is ; from where does the money come from? It must come from the oil price at a rate which matches the expenses of additional oil production.
In 1997 the economic crisis hit South-East and North Asia which led to a reduction of demand ol oil in those countries. Some say that the oil price collapsed partly because of the
economic down-turn in parts of Asia. The price at US$11 per barrel was not economically viable.
The rise of oil price means that demand is more than the supply. In fact it actually occurred. The OPEC (Organisation of Petroleum Exporting Countries) quotas resulted in an average reduction of 1.2 million barrel per day in 1999. These cuts were off set by a 1.3 million barrel per day increase in demand over the same period because the Asian economy has picked up again and the demand for oil has increased.
It appears that the dynamics of continuing oil production lead to a view that the oil price will continue to be above the equilibrium price of US$20 for the coming years. Oil prices are unlikely to fall at US$11 prr barrel. Those days have gone and the oil-importing countries should be prepared to pay for high oil prices. The adage that what goes up must come down does not appear to be applicable in respect of oil price.
The writer. a barrister, is Former Bangladesh Ambassador to the UN. Geneva.