Briefs

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Oil prices overheat

OIL PRICES shot up to $75 a barrel last week in what observers say was triggered by fears of US military action against Iran, the world's fourth biggest oil producer.

The rise comes at a time of political tensions in several main oil- exporting countries. In addition to Iran, crises raging in Iraq and Nigeria have pushed oil prices to levels that could threaten economic growth.

Although oil prices stand far below the levels attained in the wake of the Arab oil embargo of 1973, they have risen dramatically compared to the beginning of 2002. The price per barrel of oil then stood at approximately $18.

The impact of shooting oil prices on the global economy has been moderate so far. The International Monetary Fund predicts that the world economy will grow by 4.9 per cent this year, up from 4.8 per cent last year.

But there are still lingering fears that oil prices could again shoot up to over the $40 per barrel attained in 1990, and the 40 per cent increase in oil prices that occurred in 2000. Both rises were both followed by recessions in the US. Should this happen again, it would be reflected in a weaker dollar and an increase in inflation worldwide.

The supply side of the equation is not the problem. Members of the Organisation of the Petroleum Exporting Countries have raised their oil output by more than 10 per cent in the past six years. Saudi Arabia is spending billions of dollars in developing new oil fields.

Oil-producing countries blame consumer nations, particularly the United States, for lack of planning. The US consumes a quarter of the world's oil output and over 40 per cent of its gasoline, but has not built a new refinery on its soil for decades.

An increase in oil prices would enhance the exports side in Egypt's trade balance and increase its much-needed foreign currency reserves. Another positive effect would be an increase in tourism revenues if more tourists come in from the oil-rich Gulf countries. Egypt's oil exports stood at around $2 billion in 2004/ 2005.

Omar Effendi for one billion

OMAR Effendi's sale is still making the headlines. Minister of Investment Mahmoud Mohieddin told the People's Assembly last week that negotiations with the Saudi Anwal group are still ongoing. He said the bid submitted by the group has been the best so far, ever since Omar Effendi was put on the block in 1999. This is a month after the prosecutor-general announced that claims of the misappropriation of public funds by the Ministry of Investment and the chairman of Holding Company for Trade (HCT) are invalid. Addressing the People's Assembly's Economic Committee Mohieddin pointed out that Anwal's offer includes the payment of LE505 million in cash, and LE50 million for an early retirement plan for Omar Effendi's workers. According to the minister, Anwal will assume LE155 million in overdue tax payments and LE45 in debts in addition to pumping LE200 million in new investments. This pushes the overall value of the bid up to LE1.090 billion.

Mohieddin said that protecting workers' rights and preserving the main activity of the 82 department stores affiliated to Omar Effendi has taken priority in the negotiations for the company' sale. According to the new plan, any layoffs will be considered a violation that could lead to the contract's cancellation. The same principle applies in the case of change of the company's activity.