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To: excardog who wrote (34133)	8/4/2004 3:03:38 PM
From: Tommaso	Respond to of 206326

I don't think there is any rational way to measure a "terrorist premium." I tend to disbelieve in it myself. The recent statements by OPEC representatives that high prices are now "out of our control" seem sufficient to me to explain the recent spike in oil prices. All they have to do is wave their hands in the air helplessly and let growing demand push prices up. I guess the unknown is Russia.

To: excardog who wrote (34133)	8/4/2004 3:46:37 PM
From: Taikun	Respond to of 206326

One way to measure a terrorist premium (although I don't know where the data is) would be to get the insurance data for VLCCs and other infrastructure (Lloyds?) and perhaps that would show some trend. Then there are security costs for protecting places like the Straits of Malacca. Who pays for those gunboats to chase the pirates out of that waterway?Plus you have the general increases in shipping costs. OPEC says they can't control the market price. I think it is quite plausible that a portion of the increase between what OPEC's target is and the WTI spot is insurance+security+shipping increase. Once VLCC ship costs about $50m. Has the insurance gone up on that. (I haven't had a look at FRO or VLCCF financials to see). The day charter rate is in the $100,000 range-up significantly from two years ago, when it was around $30,000. I think the higher price is partly reflecting the higher insurance and shipping costs, since speculative positions in oil do not seem to be increasing according to data I have seen. I read that there are 4500 security personnel watching the pipelines in Iraq-yet they still get blown up. I wonder if there is even insurance on that? Who pays for all this security-in Iraq and elsewhere? Even if we have a recession, these insurance and security costs won't subside without more peace.