The Islamic Post Blog


Gloom and Glory in the Oil Realm by Khalida
December 1, 2008, 1:06 am
Filed under: Business/Economy, December Volume 1 - 2008, International, World | Tags:

By Khalida Khaleel
Islamic Post Staff Writer

As oil prices plummet, and gloomy predictions prevail, some oil-producing countries are feeling the impact more than others  after the rapid 3 month decrease in the price per barrel from $147 to $55 (at press time); while in some areas, the oil industry is being bailed out with tax dollars.
In one such instance, the Russian government pledged $50 billion to help refinance the foreign debt of oil and gas companies in the country in an attempt to curtail the effects of the global economic crisis upon its oil industry.
For its part, OPEC has decided to cut production slightly to maintain profits in the face of the apparent decrease in oil demand. It had been said that consumers worldwide are simply spending and traveling less, causing gas prices to plummet. Whether or not it is fair to the consumer, the intergovernmental oil monopoly, OPEC, “ Wants You to Pay More for Gas,” as was bluntly described in a Time Magazine headline from October .
As regards Venezuela, analysts have raised questions about the likelihood of the nation surviving the squeeze, which began, according to industry definitions, the moment the price of oil dropped below the $70 per barrel mark. Bloomberg’s headline predicted: “Chavez Ambitions in Venezuela May Fade With Oil Price;” although the Venezuelan president may yet disagree (See VENEZUELAN ECONOMY, C4, Col. 5)
But the outlook is not predicted to be gloomy for everyone.
Like their Russian counterparts, major oil companies in Britain and the United States are also being given a helping hand against financial disaster, in this case, by the Iraqi Ministry of Oil. In closed-door talks held in London, 34 petrol giants, including Shell, British Petroleum (BP), Exxon Mobil and Chevron, met with Hussain al-Shahristani, Iraq’s Minister for Oil, to bid on contracts to help extract 115 billion barrel of proven oil. The bid is a landmark for the war-torn country, whose oil resources have not been sold as such since 2003.
According to the UK Telegraph, “Iraq was at the forefront of world-wide oil production until the Ba’athist regime nationalized the industry in the 1970s. Although Saddam Hussein made deals with French, Russian and Chinese oil companies in the 1990s, United Nations sanctions barred the country’s re-emergence as a leading source of energy supplies.”
The daily news outlet also quoted aides at the Park Lane meeting in London as saying, “the location was deliberately chosen to demonstrate that Iraq had shed its old pre-occupations about foreign powers dominating the industry, which generates ninety per cent of its annual income.”
In an article entitled, “Iraqis Have Money but Lack Know-How in Spending It,” the Associated Press claims “Iraq’s government has an unusual money problem as much of the world grapples with a credit crunch — it can’t spend its oil riches fast enough.”
This conclusion was reached as the result of a U.S. Government Accountability Office report which estimated Iraq could arrive at a $79 billion budget surplus by the end of the year considering, “oil revenues and unspent funds from previous budgets.”

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