www.irna.com

Vienna, Feb 24, IRNA -- The price of the OPEC basket of seven crudes stood at 31.84 dollars a barrel on Friday as against the 31.84 dollars of the previous day, according to OPEC Secretariat
calculations here, Monday.

The basket price in the last 30 working days in dlrs:
Fri 10 January 29.82
Mon 13 January 29.82
Tue 14 January 30.21
Wed 15 January 30.66
Thu 16 January 30.87
Fri 17 January 31.02
Mon 20 January 31.21
Tue 21 January 30.90
Wed 22 January 30.89
Thu 23 January 30.18
Fri 24 January 30.56
Mon 27 January 30.16
Tue 28 January 29.83
Wed 29 January 30.30
Thu 30 January 30.58
Fri 31 January 30.71
Mon 03 February 30.29
Tue 04 February 29.98
Wed 05 February 30.52
Thu 06 February 30.77
Fri 07 February 31.25
Mon 10 February 31.38
Tue 11 February 31.35
Wed 12 February 31.30
Thu 13 February 31.91
Fri 14 February 32.33
Mon 17 February 31.90
Tue 18 February 31.85
Wed 19 February 31.95
Thu 20 February 31.48

For the first quarter of 2002, the basket price averaged dlrs 19.83 a barrel as opposed to dlrs 18.38 in the 4th quarter of 2001.

For 2001 as a whole, the price of the basket averaged dlrs 23.12 a barrel, compared with dlrs 27.60 in 2000, dlrs 17.47 in 1999 and dlrs 12.28 in 1998.

The OPEC basket comprises Algeria's Saharan Blend, Indonesia's Minas, Nigeria's Bonny Light, Saudi Arabian Light, Dubai of the United Arab Emirates, Venezuela's Ti Juana and Mexico's Istmus Crude.

MN/LS
End

sg.biz.yahoo.com Monday February 24, 3:38 PM

TEHRAN (Dow Jones)--The Organization of Petroleum Exporting Countries won't reduce its output ceiling at its March meeting given the fact that the oil market is being driven by military and political tensions in the region, Iran's Oil Minister Bijan Zanganeh said Monday.

"We won't reduce production given the existing situation which is unusual because of the military and political situation in the region. The pressure on the oil market has nothing to do with fundamentals," he told reporters on the sidelines of an industry conference in Iran's capital.

Zanganeh said Iran hadn't received a proposal for OPEC to suspend quotas if the U.S. leads a strike on Iraq. "We will consider any proposals when (OPEC) gets together (in Vienna on Mar. 11)," he said.

Fellow OPEC members Saudi Arabia and Kuwait floated the proposal to mitigate the possibility of oil prices spiking in the event of a war on Iraq.

Iran/OPEC -3: Prices Depend On Duration Of Any War,Damage

Zanganeh said the direction of global oil prices would depend on the duration of any war on Iraq, the extent of any damage inflicted on Iraqi oil facilities, and the possible spillover of any military action and tensions into neighboring countries.

Asked whether he still thinks a potential supply glut of 3 million - 4 million barrels a day could be triggered by the traditional drop in demand in the second quarter, Zanganeh said: "If we are to talk about the second quarter, with the arrival of Venezuela, we'll have the market excess I mentioned before."

Oil production in Venezuela, once the fifth largest exporter in the world, has been crippled by two months of industrial action.

OPEC will review its oil output ceiling of 24.5 million b/d at its Mar. 11 meeting in Vienna.

• By Hashem Kalantari, Dow Jones Newswires, 0098218966230 -Edited by Hilary Mc Cully

www.mises.org by Llewellyn H. Rockwell, Jr. [Posted February 24, 2003]   Oil prices have reached a 29-month high, reflecting a variety of factors including the prospects for war, expectations of lower supply, strikes and other unrest in Venezuela and Nigeria, and inflationary pressures. At the same time, the Producer Price Index recorded a 1.6 percent jump in January, the biggest across-the-board increase since January 1990.   Just as the script dictates, cries of "gouging" are now heard across the land.   "I think a lot of it is pure greed," a consumer told the New York Times. Another said, "If there's a chance of the oil companies' driving up the prices, they'll do that." Another: "I don't blame the government, I blame the gas companies."  Still another: "They are going to get all the money they can out of us."   In covering economic issues, journalists have a way of quoting the most ignorant possible statements by consumers. And you watch: these statements will, in turn, be followed by statements from officials warning gas stations and oil companies against raising prices too much. A poor station owner will be singled out by a local newspaper and might eventually face some sort of federal charges for economic crimes.   Of course gas station owners and oil companies want to make a buck. So does everyone else, in good times and bad. They want to charge the highest price possible, consistent with the highest profit. At the same time, consumers want to pay the lowest price possible. It is in the marketplace that these differences are sorted out in the glorious and peaceful institution of voluntary exchange, where a meeting of minds takes place and society's needs are met.   For hundreds of years, thanks to the insights of economic science, we've known a lot about the forces that push prices in a range of different directions. We know that producers will offer more supply at a higher price than a lower price, and we know that more consumers will buy more at a lower price than a higher price. We know that all of this happens without the guiding hand of government. Students are taught this in Economics 101 (whether they remember it is another matter).   What we do not know are the precise weighting of factors that go into why prices increase at any particular time. The bits of information that are built into the price of anything are too diffuse and vast. For the same reason that no price on the market can be completely unpacked and dissected, it is also impossible for any outsider to know what the price of anything "should" be. That is why the market price exists in the first place: to provide an evaluation of the value of resources relative to their availability, their desirability, and the costs associated with delivering them.   Ah, prices! How we take them for granted! In fact, they are guides to the conduct of life itself. What should you have for dinner? Should you take that vacation or not? Should you buy or rent? Should you supplement your wardrobe or not? Should you heat your house till it's warm and cozy or just wear a sweater indoors? All these decisions are made based on the price of things. They are what make rational daily living possible. Without them, all would be chaos.   But somehow, in a time of crisis when prices leap around in various directions, doing their job to coordinate supply and demand and conserve resources to overcome the uncertainty of the future, all this wisdom is forgotten. Consumers suddenly look at their retailer as the enemy and the government starts taking names. The worst part is that it is precisely during times of market uncertainty and change that prices are needed more than ever to coordinate resources.   When the oil price rises, it suggests more supply is needed. More precisely, it sends two signals: to consumers it says conserve, and to producers it says invest. If nothing else changes, and people follow the price signals, the price will end up falling as consumers cut back purchases and producers bring more product to market. Putting a price ceiling on oil will short circuit this mechanism, causing producers to offer no more than is currently available (or even less), and consumers to continue buying as much as they always have. Again, if nothing else changes, the result will be shortages, which the government will attempt to rectify through ever more stupid policies.   In the case of the oil price, there is an additional complication. Many people in powerful position are dead-set against a lower oil price. The environmentalists are nervous about lower prices because they fear it will lead to more gas consumption and SUV purchases. This is one reason, and not love of caribou, that they oppose opening up more public lands for drilling.   In government, we've had sanctions against Iraq that have artificially kept supplies off the market, driving up the price. This is something the Bush administration, closely connected with the oil industry, approves. David Frum reports in his account of his time with the Bush administration that Bush himself is a passionate opponent of lower oil prices. Frum once suggested that Bush call for lower prices to help consumers. Bush looked at him like he was nuts, and pointed out that lower prices are the source of all the problems.   Max Boot, current fellow at the Council on Foreign Relations and former editor of the Wall Street Journal opinion page, provides further evidence that this is the case. "For that matter, would our government really want a steep drop in prices? The domestic oil patch—including President Bush's home state, Texas—was devastated in the 1980's when prices fell as low as $10 a barrel. Washington is generally happy with a range of $18 to $25 a barrel."   Even as far back as the 2000 presidential race, Richard Cheney told "Meet the Press" that "we need a national energy policy." He explained that prices can be too high but that they can also be too low ("no one will invest"). He was asked, "what is the correct price of oil," and Cheney mumbled on about the need for price stability.   These are very dangerous attitudes based on remarkable ignorance of the forces of economics. No one can know in advance what the correct price of anything should be. If prices fall, it would indeed signal producers to offer less. Some producers, maybe even most, would go out of business. This is precisely what should happen.   There is no way for government to plan better than the market, especially for unusual market disturbances, which is why Soviet-style programs like the Ford administration’s "Strategic Petroleum Reserve" are so ridiculous. They work as subsidies to the oil industry even as they keep supplies on the market artificially low. Knowing that the government may, at any time, unleash all this pent-up supply on the market, producers face a diminished incentive to drill and process oil for consumption.   But to the average consumer, none of this matters. They see only the price meter on the gas pump, and get mad at the poor fellow behind the counter that processes their credit cards. Then they go running to the government for help. This is the worst possible outcome. Remember that fellow who said "I don't blame the government"? Well, he should. And if the government intervenes to force the price down and shortages result, he will have even more reason to do so.

Llewellyn H. Rockwell, Jr. is president of the Mises Institute in Auburn, Alabama, and editor of LewRockwell.com. Send him MAIL, and see his Mises.org Daily Articles Archive.

www.indianexpress.com R K Pachauri

The annual budget of any government is in some sense like a performance by the proverbial Indian juggler. It is not merely an exercise in balancing the annual revenue and expenditure of the government, but also a major effort in stimulating economic growth and development and maximising the country’s human welfare. Even more important, however, is the significance of the budget in highlighting and signalling policy directions that look beyond the year for which the budget is formulated. Within these objectives, the budget of the Government of India this year has also to contend with the reality of state elections scheduled this year and the parliamentary elections due in 2004.

It would be interesting to see how liberalisation is built into the coming budget, given that rapid efforts at opening up the Indian economy and pursuing a vigorous plan of disinvestment would have political repercussions. Yet, the creation of a bullish business climate and an upward trend in economic growth over the next eighteen months would actually provide the NDA Government with a political advantage. The budget must, therefore, take full advantage of the global flow of investments.

There are two major sets of global developments that should also guide the thrust and content of the annual budget. The first relates to the World Summit on Sustainable Development (WSSD) held in Johannesburg, which came up with certain global targets and priorities, which India not only has to be seen as a part of, but should actually provide leadership to as a major developing country. The second set of global developments arises out of the situation in the Middle East, the threat of war in Iraq and the political turmoil in Venezuela, which have had a major impact on global oil prices. The fact that India has to be concerned about global oil market developments also highlights the need for an integrated long-term energy strategy for the country, which unfortunately has not even been enunciated, and therefore not implemented despite three decades having gone by since the first oil price shock of 1973-74.

First, let us deal with the WSSD. There is much in the Johannesburg agreements that are in accord with our own priorities and critical challenges. For instance, Johannesburg agreed that by 2015 all children should be able to complete a full course of primary schooling. It also targeted a reduction in mortality rates for infants and children under 5 by two-thirds and maternal mortality rates by three-quarters by the year 2015. Similarly, it was agreed that by 2015, the proportion of people without access to safedrinking water should be halved.

The year 2015 is not far away. If our Government does not wish to have this country remain a sad aberration on the global scene, we have to take action. What can India do to provide substance to the decisions taken at the WSSD? Perhaps the best course of action would be to live up to Gandhi’s advice: ‘‘Be the change you want to see in the world’’. This means that the budget must provide a powerful signal reaffirming the Government’s commitment to goals that the world has accepted as important to the principles of sustainable development.

Now, on the issue of energy security, recent developments in West Asia have only brought to the surface an uneasy truth that has remained hidden in the maze of short-term expediency in the energy sector. The reality of energy sector developments in India for several years now has been the existence of a fragmented approach.

Responding to a heightened perception of threat to energy security, the Government has, of course, pursued, investments in the Sakhalin oil field in Russia and oil reserves in Sudan, but the increase in demand for imported oil provides reason for concern. Energy security does not increase only through actions in the hydrocarbons sector. Much of our dependence on oil consumption and, therefore, on oil imports grows out of failures in supply of electric power for instance and the lack of adequate technological development in large-scale use of clean coal technologies. To what extent is the Government prepared to pursue a vigorous agenda with the states in restructuring the electricity supply industry? Can the budget restore the momentum through fiscal incentives and a more proactive role by the Finance Ministry, to resurrect the efforts of Suresh Prabhu when he was the Power Minister? Similarly, can the budget provide a combination of incentives and disincentives for metering of electricity supplies to the agricultural sector and pricing based on the quantity consumed?

A state of apathy seems to be in evidence as far as the electricity sector is concerned. Unless this is addressed effectively, GDP growth will suffer and there would be no improvements in the coal supply industry either. Similarly, given that the major consumer of natural gas in the country would be the power sector, there is little incentive for its exploration and production.

The country’s energy security naturally has to be seen both in a short-term context and in terms of a long-term strategy. In the immediate short-term, the oil companies and the Ministry of Petroleum and Natural Gas are concerned over coping with threats to uninterrupted and adequate supply of petroleum products in the event of a war in Iraq. Oil prices have already reached levels above $30 a barrel, and while OPEC’s recent decision to increase production by about 1.5 million barrels a day would help in stabilisation of the oil market — unless there are prolonged hostilities in the Middle East — it would then have to be seen how OPEC reviews the situation and takes further decisions when it is due to meet on March 11.

India’s immediate concern is to ensure that it has enough stockpiles of petroleum products that would ensure continuity of supply. Given the fact that the Government’s Hydrocarbon Vision projects a demand at 276 million tonnes of oil equivalent of crude oil in the year 2025, the need for a strategic petroleum reserve (SPR) would become even more important in the future. The US, for instance, maintains an SPR of almost 700 million barrels at any point of time, which is essentially under some form of control by the US administration. The biggest danger of destabilisation of the global oil market for India is not so much in the nature of a physical disruption in supply, but essentially in the nature of an economic threat. An increase in oil prices, which, if maintained for anything beyond 10-12 weeks, would have a major inflationary impact on the Indian economy, and other adverse macroeconomic effects due to a substantial increase in foreign exchange outflows. In the short run, therefore, the Government would have very limited options to cushion the economy against an economic shock, which only lends further relevance to the need for an enlightened long-term energy strategy.

There are several elements that would define such a strategy. First, we need to enhance the supply of natural gas to India from neighbouring countries such as Iran, Bangladesh, Myanmar and possibly even Turkmenistan provided a proper route can be established through Afghanistan and Iran. On the supply side, India also has to exercise much bigger options for use of renewable forms of energy, resources for which are in abundance in this country. But there is also need to manage demand for energy effectively in the long run.

Going back to the issue of the annual budget, it is not clear how much the Finance Minister can really do to set the country on a course that helps to develop an integrated energy strategy and enhance security of supply. But given the fact that the Five Year plans, which were a major instrument for defining long-term policies in this country earlier, now have very limited value in setting new directions, the annual budget assumes much greater importance in serving the longer term interests of Indian society. One hopes that some of these issues will be considered and embedded in the annual budget this year. If not, then perhaps it would not be too late to start an exercise both for meeting the objectives of sustainable development as well as energy security by the time the monsoon session of Parliament begins.

(The writer is the director-general of TERI and chairman of the Intergovernmental Panel on Climate Change)

asia.reuters.com Sun February 23, 2003 09:38 AM ET By Neil Chatterjee

LONDON (Reuters) - World oil prices now near two-year highs are set to slide 30 percent in the second half of the year after any U.S.-led war on Iraq, a Reuters poll found.

The survey of 14 oil analysts and consultants, undertaken on Feb. 10-21, projects prices dropping nearly $10 to $22.46 a barrel in the second half of 2003, from $32 a barrel now.

It forecasts $27.53 a barrel for the first half of the year and gives a 2003 average of $24.30, down from $25.03 in 2002. Brent so far this year has averaged $30.98, forcing many analysts to revise forecasts higher.

Prices are expected to slump in the second half after being boosted in recent months by a strike in Venezuela and fears of an attack on Baghdad.

"Once war is over, it will come down pretty sharpish, and Venezuela will be less of a factor," said Matthew Parry of the Economist Intelligence Unit.

Analysts expect prices to slide after a short war in the next few months, a projection which, if borne out, would provide a welcome stimulus to a world economy struggling for growth as energy costs stay high.

"Most people are working on the basis of a big slide later on -- the economic impact will be beneficial," said John Waterlow of consultants Wood Mackenzie.

"The economy needs something to give it a boost -- the simplest way is an oil price drop."

Finance ministers from the Group of Seven wealthiest nations met in Paris on Friday to discuss what can be done to stop the rot in the global economy, following a poor set of U.S. economic data on Thursday.

Economists estimate every $10-a-barrel rise in oil over a year cuts world growth by 0.5 percentage points.

Oil prices have spiralled on worries that conflict with Iraq could spread in the Middle East, which supplies around one third of the world's oil.

First quarter prices have also been boosted by the prolonged strike in Venezuela, which has slashed oil shipments from the world's fifth biggest exporter.

Analysts have upped their price forecasts for the year by about $1.50 a barrel, over six percent, in the past month as the 11-week-old strike helped reduce U.S. crude inventories to 27-year lows.

"The Venezuela strike has tightened stocks considerably, and there'll be a need for stock building in the second quarter," said analyst Lawrence Eagles of brokers GNI-Man.

The U.S. Energy Information Administration said this month that it expected U.S. crude oil to stay above $30 a barrel for the rest of the year, though most analysts see oversupply by the fourth quarter.

OPEC COMPLIANCE?

Oil demand growth will be too sluggish to cope with the increased supply once Venezuelan production recovers and Iraqi output resumes after a war, they said, while non-OPEC countries' output is also on the up.

Differences in second half price forecasts depended on the extent to which oil cartel OPEC could control its production limits.

"We think there will be a significant fall off because of new capacity from the likes of Algeria and Nigeria, which will put increasing strain on OPEC cohesion," said Richard Savage of Bank of America.

"We think it will be higher for longer -- our view is that OPEC can control prices between $22-$28 in the medium term," said an analyst at another bank, which revised its figures upwards this week.