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Politics : Rat's Nest - Chronicles of Collapse -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (7995)	6/30/2008 12:59:24 PM
From: Wharf Rat	Read Replies (1) \| Respond to of 24226

To China, stability may be more valuable than oil profit By Chen Aizhu ReutersPublished: June 30, 2008 BEIJING: The dramatic decision by China to raise fuel prices by more than 15 percent last month might seem to suggest that Beijing is shifting into a higher gear in its drive toward raising the prices of domestic resources to global norms. Don't be fooled, analysts say. The sudden increase does not mean a sea change in Chinese policy although it might embolden Beijing to take small but more frequent steps in the future, if the fallout from fuel price increases is contained. The 17 to 18 percent increase took hold June 20, months earlier than most analysts expected and was nearly double the biggest increase in recent years. The increase was motivated less by long-term policy goals and more by short-term political imperatives. Depressed profit margins for refiners had caused supplies to run short along the coast, while a global crisis meeting among the world's biggest consumers and producers on June 22 gave Beijing an opportunity to show that it was doing its part to curb demand that had been stoked by low prices. But with its battle against inflation still a top priority and a long-running goal of maintaining healthy economic growth powered in part by affordable fuels, Beijing is likely to return to its path of measured, gradual price liberalization. "The government approach for oil price reform will continue be a jogging in small steps," said Yang Fuqiang, of the U.S. Energy Foundation, which advises on Beijing's energy policies. "Full price liberalization will take at least five years. And five years is my very, very optimistic bet." The June 20 price change was the third increase in 25 months, following a 10 percent rise in both May 2006 and November 2007. Crude prices have nearly tripled during that period. Even as the rally in oil has accelerated since 2006, China has become more reluctant to make frequent adjustments to its administered fuel prices, preferring instead to dole out subsidies to PetroChina and Sinopec, the state oil companies that bear most of the soaring cost of imported crude. Between 2003 and 2005, Beijing raised prices 11 times and cut prices twice. Three years ago policy makers, hopeful that oil prices would halt their ascent at around $60, had managed to bring Chinese prices near to parity with global markets, and introduced a system for keeping them pegged to global crude oil benchmarks. But their resolve was short-lived, and the challenge is now far greater as China faces inflation skirting the highest level in 12 years, soaring costs for other forms of energy like coal and a still-sizable gap with global rates. Even after the latest increase, Chinese gasoline is a fifth cheaper than in the United States and two-thirds less than what British motorists pay, while diesel is half Singapore rates. Prices would need to rise by at least another 20 percent for refiners simply to break even, analysts say. "An 18 percent increase is still modest compared with crude's doubling since last summer," said Victor Shum of the consultants Purvin & Gertz. "It only means some unmet demand will get met now." Economists say that the price increase should add less than one percentage point to inflation, while Beijing has pledged subsidies to vulnerable groups like farmers, fishermen and cabdrivers, hoping to minimize the threat of social unrest ahead of the Olympics. And with inflation likely to ease in the coming months as food price pressures cool, government economists are urging Beijing to quicken price reform to really dampen growing oil use, one of the major reasons behind the six-year rally in oil. But analysts say that Beijing will want to be certain that any fallout is contained before nudging ahead on reform again. "For now, the government's attitude is take one step at a time and see how things turn," said Liu Bo, an oil analyst in Shanghai with Guojin Securities. And it does have other options if it wants to stave off the next move while still ensuring that mounting refining losses do not trigger another round of fuel shortages. It has already instituted a string of tax incentives and administrative mandates to trim losses for its state oil firms and raise supplies. Beijing has yet to rule on a proposed change in its windfall tax on crude oil production that would shift some of the bumper revenues from the crude producers PetroChina and Sinopec to their own loss-making refining departments. For a country that still prizes stability over all else, that may hold more appeal than imposing further pain at the pump. iht.com

To: Wharf Rat who wrote (7995)	7/2/2008 11:20:15 AM
From: Wharf Rat	Read Replies (1) \| Respond to of 24226

Russia's Oil Output Falls in June, Extending Decline (Update1) By Greg Walters July 2 (Bloomberg) -- Russian oil production declined in June, bringing the world's second-largest crude exporter closer to its first annual drop since 1998. Production fell to 9.77 million barrels a day (40 million metric tons a month), 1 percent less than in June last year, according to data released by CDU TEK, the dispatch center for the Energy Ministry. Output rose 0.2 percent compared with May. Russia's production may have peaked as producers struggle with aging fields, rising costs and increasingly remote new deposits, senior executives at Moscow-based OAO Lukoil and TNK-BP, the country's two-biggest independent oil companies, have said. The finance and energy ministries are developing tax-cut proposals in a bid to revive growth. Crude oil exports via OAO Transneft, Russia's oil pipeline monopoly, fell 1.3 percent compared with the same month last year. Russia's government has supported raising the level of when its oil-extraction tax takes effect to $15 a barrel from $9 a barrel as oil companies' costs soar. OAO Rosneft, the country's biggest producer of crude, raised capital spending 69 percent in the first quarter this year to $1.75 billion. The oil market will be ``tighter'' than previously expected because many major projects throughout the world are experiencing ``slippage'' of 12 to 15 months in their completion time, Nobuo Tanaka, executive director of the International Energy Agency, said yesterday. Oil prices touched a record $143.67 a barrel in New York this week on concerns of a disruption to Iranian output, capping a 47 percent increase in the first half of the year. To contact the reporter on this story: Greg Walters in Moscow gwalters1@bloomberg.net Last Updated: July 2, 2008 05:14 EDT bloomberg.com