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> Rising of prices of oil and palm oil <
Published on 2/18/2008 By Ayesha Hafeez
Rising oil price is a cause of concern for all the South Asian countries including Pakistan. For Pakistan, the situation is not good as Pakistan needs more and more oil to sustain its high economic growth. Unfortunately, in the international market, the price of oil is very high and it is not stable either. So, Pakistan government is now contemplating on the idea of having an oil reserve of 60 days. Right now, oil reserve of 20 days is kept.

Pakistan Link
“Pakistan has decided to increase its strategic oil reserves from 21 to 60 days of consumption to ward off security, commercial and economic concerns in case of an unexpected supply disruption.

Official sources said the government had not yet decided how it would increase strategic stocks of crude oil and petroleum products.

A number of issues emerged during initial discussions among stakeholders on the subject. The discussed issues such as imposing a tax to generate funds for the storage capacity and build-up of stocks, operations of these stocks and whether the stocks should be maintained by oil companies or by the government or by a new strategic stocks entity.”

It is good plan and many people in Pakistan would be happy. No one wants to see instability in the supply of oil. However, keeping a 60 day reserves is an expensive matter too. Then Pakistan will have to spend extra cash engaged for this matter.

*-  Palm oil commodity prices now sit above $1,000 per tones on the strength of rising demand from increasingly plowbacks in the good old days of 2001 when the world seemed so ripe with possibility palm oil leaped from $220 per tones to $290 per tones in just 3 weeks. But now it is almost 5 times more expensive with a recent price of $1040 per tones.

. A year ago the price was what happens when oil production peaks (it might have already) and starts declining? The higher the price of petroleum oil goes up the higher vegetable will go up along with. Rises in fossil fuels diesel prices cause rises in the price that companies will pay for vegetable oil to use to create biodiesel. It is as simple as that600I am expecting food exports to follow a pattern similar to oil exports. As big exporting countries start to find internal demand is growing rapidly the internal pressures will build to stop exports. Bans on exports will create the conditions for market prices for food and oil which are lower in many producers than on the world market Oil Prices have doubled from the rates seen in January 2007 and more than quadrupled since 2002.

What factors are causing this unremitting increase and what are the likely consequences for consumers and the global economy?

ices have hit a record high at $100 a barrel What is causing the latest price spike?

This was triggered by concerns about violence in Nigeria and Algeria as well as the delay of the elections in Pakistan.

Prices have remained above $70 a barrel for most of the year

The assassination of the former Pakistani Prime Minister Benazir Bhutto increased oil prices because stability in Pakistan is important to US policy in the Middle East.

Threats to oil workers and facilities in Nigeria have cast a long-term shadow over oil supplies from the world's eighth largest oil exporter.

Suspected militant attacks on Wednesday in Nigeria's main oil city, Port Harcourt, heightened concern over the potential for further disruptions in shipments.

"With the military and the militant warlords engaged in a violent tit-for-tat, the risk for oil disruptions in Nigeria remains higher than in the past few months," said Olivier Jacob of Petromatrix.

The weak dollar, which makes it cheaper for importers to buy dollar-denominated oil supplies, is also a major factor.

Is demand for oil continuing to soar?

Yes. The biggest catalyst for oil's seemingly remorseless rise has been the simplest economic driver there is: the balance between demand and supply.

Demand is at an all-time high, fuelled by the continued breakneck economic expansion of the Indian and Chinese economies.

With more than a billion people in each country, and both economies growing fast, manufacturers and consumers are sucking in energy at an ever-increasing rate.

China overtook Japan as the world's second-largest consumer of oil in 2003 and is closing in on the US, with demand for oil growing at about 15% a year.

Analysts worry global demand for oil is so intense that supplies may not keep pace.

Demand will rise by an average of 2.2 million barrels a day next year, the International Energy Agency says, compared with the 1.5 million-barrel rise seen in 2007.

It says annual demand will rise 2% up to 2012, while other projections suggest demand could soar from about 90 million barrels a day to as much as 140 million over 25 years.

What is Opec doing about the situation?

As the leading oil supplier in the world, producers' cartel OPEC is under constant pressure to do something about the price bubble.

It recently bowed to pressure to pump more oil, agreeing to raise its production quotas by 500,000 barrels a day from 1 November.

Reports suggest the move was forced through by Saudi Arabia and that few other Opec members either have much stomach for increasing output or much capacity to spare.

OPEC has said the market is "very well supplied" with crude and will continue to be so in the immediate future.

It has blamed speculation by market traders - who can make money by betting on the future direction of prices - for the continuing price rises.

Critics of Opec say it must act more aggressively to bring prices down.

"The response from Opec has been pretty poor so far," says John Roberts, an energy security analyst with commodities research firm Platt's.

"The sentiment in the market is that it is time for OPEC to increase production again."

Who are the winners and losers from costly oil?

Taking inflation into account, prices are still below levels seen in late 1980, when a barrel of oil - in today's prices - was worth more than $101.

Back then, costly oil helped contribute to a recession in the US and similar fears are resurfacing now.

The Bush administration has said it is "very concerned" about current price levels, at a time when the economy is already expected to slow significantly next year.

High energy prices make life more expensive for consumers and businesses, having an knock-on effect on their spending in other areas.

Gasoline prices are hovering not far below the $3-a-gallon mark in the US, while UK petrol retailers have warned prices could soon rise above £1 a liter.

But on the other side of the fence, oil giants such as Exxon Mobil and BP are having a wonderful time, while oil-rich countries are also smiling.

Oil wealth has underpinned President Hugo Chavez's efforts to reshape Venezuela, allowing him to fund extensive social programmes and reject US criticism of his policies.

Russia's oil and gas bonanza has underwritten efforts by President Vladimir Put in to exert state control over the country's energy sector.

Where will prices head next?

Many people scoffed when analysts from investment bank Goldman Sachs said in 2005 that prices could eventually top $100 a barrel.

"All of the factors that pushed us above $80 are now moving us higher," said Peter Beutel at Cameron Hanover in Connecticut.

"Until we get more sup the consumers have received a pre-election setback as leading producers of ghee, cooking oil and branded tea pushed up rates on Thursday.

One of the leading ghee and cooking oil producers had earlier announced an increase in the rate of one kg pouch of ghee to Rs134 from Rs123, followed by an increase in the price of oil to Rs136 from Rs125 per kg in January.

This is the eighth increase in the price made by the leading company since September 2006.

In January, all producers of branded ghee and cooking oil had increased the rate of its brands by Rs9-11 per kg, respectively.

An official in the Dalda Foods said the price of five-kg ghee tin had been increased to Rs670 from Rs615 while five liters edible oil tin price had been jacked up to Rs680 from Rs625 in January this year.

In September 2006, the five-kg ghee tin was available at Rs395. It has been noticed that Dalda takes a lead in increasing prices while others follow the suit.

Former chairman of Pakistan Vanaspati Manufacturers Association (PVMA), Amjad Rasheed, said that palm oilmen rate was now being quoted at Rs3, 800 per maund (37.23 kegs) while soybeans oil price had surged to Rs4, 400 per mounds.

In mid-January, palm olien and soybeans oil rates were quoted at Rs3, 560 and Rs4, 000 per maund, respectively.

Palm olein rate in world market is now quoted at $1,190 per ton (C&F Karachi) as compared to $1,160 in mid-January. Soya bean oil price is now quoted at $1,375 per ton as compared to $1,217. The C&F price of imported RBD palm olein was $465 in July 2006.

He said palm olien rates had declined for two to three days only, but these have again started climbing. Besides, the losing value of Pakistan rupee against the dollar is also making imports costlier.

He said that there might be a shortage of ghee and cooking oil in May or April as importers are placing low future orders for palm oilmen imports.

He added the officials of the Federal Food Committee (FFC) would meet the PVMA and solvent extractors on Feb 20 to discuss the crisis in the edible oil industry.
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