Briefs

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Unprecedented oil prices

THE NOTION that an oil barrel will touch the $100 mark has been rapidly surpassed, as oil prices for June delivery hovered around $127 per barrel last week.

The additional 300,000 barrels of crude a day pumped by the world's leading producer, Saudi Arabia, had little effect on containing price hikes. US President George W Bush arrived in Saudi Arabia on Friday for talks on the adverse impact of high oil prices on Western consumers.

Obviously, the oil price crisis does not indicate a supply crunch. Speaking in an interview at the World Economic Forum, hosted in Sharm El-Sheikh this week, Iraqi Petroleum Minister Hussein El-Shahristani said the oil market is well supplied. "Oil producing countries are pumping as much as they can at the moment," stated El-Shahristani. "Prices are being driven by speculative flows, not supply and demand." Iraq has added 500,000 barrels over the past six months, but this did not curb the oil price increase.

The Organisation of Petroleum Export Countries (OPEC), which pumps more than 40 per cent of the world's oil, has kept output targets unchanged during the past six months.

Oil market analysts believe that there is a strong perception in the market that growing demand will continue to affect prices in the upward position. They also argue that the market is undergoing a state of "structural re- pricing", which is expected to dominate for some time to come.

Predictions that oil prices could reach the $150-200 edge can be a living reality in a short time.

Rising in leaps and bounds

STEEL prices rose to record levels this week, to reach LE8,000 per tonne. While consumers and contractors accused steel producers of monopoly to control prices, producers blamed the increase in the international price of bellets (an essential component used in manufacturing steel).

Businessmen and contractors working in the real estate and construction sector complained that this rise will negatively impact their business. Ahmed El-Sawy, owner of a small company for construction, pointed out that the rise in steel prices -- which jumped from LE3,800 per tonne in November 2007 to LE8,000 this week -- will hike the total cost price. According to El-Sawy, the result will be low marketing rates for the housing units sold by his company.

Meanwhile, consumers believe that steel factories purposefully synchronised maintenance on their machinery -- and hence stopped production -- to cause a large gap between steel supply and demand. But the Chairman of the Industrial Development Authority (IDA) Amr Assal told the press that there are no monopoly acts in steel production, and the reason behind the increase in prices is cost of bellets on the international market.

Bellets rose from $480 per tonne in November 2007 to $1,050 per tonne this month. According to Assal, this leap cranked up the total cost price of steel factories to reach LE6,200 per tonne. He further explained that traders usually add an average LE200 as a profit margin, so consumers buy a tonne of steel at LE6,400. Assal also blamed traders who add a very high profit margin, causing the tonne of steel to reach its current hike.

In an attempt to increase production and cut prices, the government has licensed several new steel factories.