Thursday, June 26, 2008

False Oil Price Increase

Market Full Of Oil: The USD VS Crude Oil Experience

25 06 2008

By Hashem Kalentari

ISFAHAN, Iran (Reuters) - The oil market is plentifully supplied and the rally to record high prices is “fake and imposed”, Iran’s president said on Tuesday, blaming a weak U.S. dollar which he suggested was being pushed lower on purpose.

“At a time when the growth of consumption is lower than the growth of production and the market is full of oil, prices are rising and this trend is completely fake and imposed,” Mahmoud Ahmadinejad said.

“It is very clear that visible and invisible hands are controlling prices in a fake way with political and economic aims,” he said when opening a meeting of the OPEC Fund for International Development in the central city of Isfahan.

With high fuel prices sparking protests worldwide, Ahmadinejad hit out at energy taxes in consumer nations. He said there was an “unfair” difference in income between energy exporting and importing countries.

Iran, the world’s fourth-largest oil exporter, has repeatedly said the market is well-supplied with crude and blames rising prices on speculation, a weak dollar and geopolitical factors.

Oil steadied on Tuesday after touching a record near $140 the previous day, with traders caught between a weaker dollar and expectations that top exporter Saudi Arabia will ramp up output to its highest rate in decades.

Iran has often said it sees no need for the Organization of the Petroleum Exporting Countries (OPEC) to boost output, as the United States and other big oil consumers want.

“As you know the decrease in the dollar’s value and the increase in energy prices are two sides of the same coin which are being introduced as factors behind the recent instability,” Ahmadinejad said.

“EVER-INCREASING DECREASE”

The president reiterated his view that oil should be sold in a basket of currencies rather than dollars, an idea which has failed to win over other OPEC members, except Venezuela.

“The ever-increasing decrease in the dollar’s value is one of the world’s major problems,” he said.

“A combination of the world’s valid currencies should become a basis for oil transactions or (OPEC) member countries should determine a new currency for oil transactions,” he said.

He expressed support for a proposal by Venezuela’s anti-U.S. President Hugo Chavez to create a bank constituted by OPEC members to act as a counterweight to U.S. influence in the world. He also advocated the establishment of an oil bourse.

Iran, embroiled in a standoff with the West over its nuclear programme, has for more than two years been increasing its sales of oil for currencies other than the dollar, saying the weak U.S. unit is eroding its purchasing power.

Ahmadinejad, who has called the dollar a “worthless piece of paper”, suggested a part of its decline was deliberate, without naming any country:

“The planners for some big powers are acting to decrease the dollar’s value,” he said. “For years they imposed inflation and their own economic problems on other nations by injecting the dollar without any support to the global economy.”

Foes since Iran’s 1979 Islamic revolution, Tehran and Washington are also at odds over Tehran’s disputed nuclear activities. Iran says its atomic work is peaceful.

(Reporting by Zahra Hosseinian in Tehran; Writing by Fredrik Dahl; Editing by William Hardy)

2 comments:

Ashraf said...

The story about Subsidy

A man called CheDot owns a farm which can produce 10 apples every day.

He has 5 workers to operate the farm.

Each of them eats 1 apple daily and it is enough to keep them operating the farm normally.

The remaining 4 apples, the landlord sells them at RM10 each and he earns RM40.

He uses the RM25 to improve the farm operation and facilities.
He gives RM2.00 to each of his workers and he keeps the remaining RM5.00 as profit.

Day by day, the farm is well developed and all of the 5 workers are happy with the money they can save.

When CheDot retired, a new landlord, PokLeh comes to continue the farm operation.

He says to the workers: “We need to improve the farm quality and redefine our way of thinking.

From now on all of you only need to pay RM1.00 for each apple you eat.
It is very cheap as the price is RM10 each outside the farm.”

The workers have no choice but to pay RM1.00 for the apple they eat daily.

Their earning decrease from RM2.00 to RM1.00 per person.

As usual, PokLeh sells the 4 apples and he gets RM40.

He uses RM25 for farm improvement and pays RM10 to his 5 workers.
He gets RM5.00 as profit. On top of that, he gets another RM5.00 from the apples that he sells to his workers.

In total, he gets RM10 as profit every day.

Soon, the apple price increases to RM20 each.

The new landlord gets a higher profit as he gets RM80 for the 4 apples he sells daily.

Then, he decides to give the farming improvement contract to one of his close friend, Samy..
Samy says:”Apple cost naik, improvement cost also misti naik.”
So, the farm improvement cost increases from RM25 to RM50.
In actual, the improvement only cost RM30.

The remaining RM20, PokLeh and Samy share evenly among themselves.

Let’s calculate how much PokLeh gets daily:

RM10 (from farm improvement cost)
RM20 (Net profit by selling 4 apples: [Gross profit, RM80] ?
[Improvement cost, RM50] ? [Wages RM10] = RM20)
RM5 (from selling apples to his workers)

In total, PokLeh gets RM35 daily compare to RM10 initially when he takes over the farm from CheDot.
His profit increases RM25 and the workers are still getting RM1.00 daily per person.

The greedy PokLeh does not want to stop there.

One day, he says to his fellow workers:” You see ah, the current
market price for one apple is RM20 and you are only paying RM1.

See how lucky you are! I have to SUBSIDY RM19.00 for each of the apple you buy and total I need to SUBSIDY RM95.00.

This will greatly burden the farm and we might get bankrupt if we continue like this.
In order to avoid bankruptcy, I need to increase the apple price that you buy from RM1.00 to RM1.50 and I will bare the remaining RM18.50 per apple as my subsidy to you all. ”

So, greedy PokLeh adds RM2.50 to his current profit and the number
becomes RM37.50.

After you have read the story, I am sure you have already understood
the meaning of a ‘SUBSIDY’ given by the BN government.

The RM95 subsidy was never existed in the first place and so was the
RM52 billion fuel subsidy generously ‘given’ by the BN government..

Cutting fuel subsidy is actually just a reason to steal money from your pocket. Are you gonna stand there and LET THEM ROB YOU???

X-7 said...

Just read the story.. very exciting and clearly understood..