Imf Report To Warn Of Oil Price

[Guest uberstuka]

IMF Report To Warn Of

Oil Price Threat To

Global Economy

By Heather Long

The Guardian - UK

8-20-5

The International Monetary Fund is to warn that record oil prices pose a significant risk to the global economy and could thwart growth next year, according to an apparent leak of its forthcoming World Economic Outlook.

Oil prices spiralled to over $67 a barrel earlier this week and many analysts have cautioned the economy could be headed for a recession if such high prices continue.

Yesterday the price of oil jumped $1 to above $65 a barrel after news that rockets hit two US warships docked in Jordan and another in southern Israel.

The IMF, normally known for cautiously worded reports, is expected to warn that, "all in all, the dangers have become greater" from oil prices, when it puts out its six-monthly global outlook in mid-September.

The Washington-based think-tank predicts average oil prices of $51 a barrel this year. This might appear to be a low figure after recent crude prices topping $60 a barrel, but last year's average oil price was under $40. The IMF outlook for 2006 is even higher, at $53 a barrel.

In the IMF's last report in April, it predicted that the global economy had "become less balanced" with unstable oil prices and worrying US current account and budget deficits. September's report is expected to conclude that the situation has become even more grave.

The critical leak of next month's World Economic Outlook surfaced yesterday in Handelsblatt, the weekday German financial newspaper.

The IMF predicts global growth will reach 4.3% this year and 4.4% in 2006, Handelsblatt said. These estimates are much lower than the 6% average growth in the global economy in late 2003 and early 2004.

The eurozone continues to lag behind other regions of the world and is expected to grow by only 1.3% in 2005. The IMF's bleaker forecasts came from worries over frequent oil production bottlenecks and a lack of refineries to meet world demand, according to the German paper.

Separately, British consumer confidence plummeted to its lowest level this year as shoppers became increasingly aware of the state of their personal finances and fearful of prospects for the economy.

The measure of the economic "feel-good factor" compiled by the market data group Experian fell heavily. Its index measuring the balance of those expecting to spend more on major purchases in the coming year had dropped to five in July, from 19 in January, it said.

"In spite of steady earnings growth and a stable labour market, perceptions of the country's economic situation and people's own household finances have worsened over the past few months," said Addween Sacha, a senior consultant at Experian.

The perceptions of the job market are especially weak according to the survey, even though Britain's unemployment rate is 4.7%, much lower than continental Europe or even the United States.

"Consumer confidence fell in almost every region of the UK, most notably East Anglia and the north, where confidence was previously high," said Ms Sacha.

Guardian Unlimited © Guardian Newspapers Limited 2005

http://www.guardian.co.uk/oil/story/0,11319,1552987,00.html

[Alberta Tatlock]

The other side of the coin:

Alberta, the Canadian province in which I now reside, is gas rich and relatively oil rich.

Alberta's 2005/2006 budgetted income from oil and gas (presented in April 2005) was $7.7 billion Canadian dollars. This was based on an average oil price of $42 USD per barrel and average gas price of $5.60 per gigajoule across the fiscal year.

On August 29th the provincial government will release its revised figures and analysts are now predicting that the oil and gas income could top $14 billion CAD. They also predict that this will continue for years to come.

(An increase of $1 in the average price of oil, and 10cents on the average gas price both individually add $99 million CAD to the province's income)

The main problem is that the provincial government can't or won't agree what to do with the prospective $6 to $7 billion windfall this year and the subsequent years after this.

There is currently no provincial sales tax here (partial VAT), and the provincial government could afford to abolish provincial income tax for individuals (currently 10% the lowest in Canada) AND abolish corporate income tax (currently 11% the lowest in Canada). The problem with that is the infrastructure couldn't cope with the likely stampede (pun intended) of corporate head offices from Toronto who would immediately slash their costs by 20%.

There are interesting times here. The leader of the provincial government is right-wing and is all for tax cuts. However, he has said he will leave the office by 2007 if not sooner. The front runner to replace him is right of centre but believes in investing the surplus in the province by spending it on education and healthcare to make Alberta "the province of choice" to immigrants and Canadians alike.

So there you have it, this is not an "I'm alright Jack" posting, I just wanted to highlight what's happening.

[Losing Faith]

The other side of the coin:

Alberta, the Canadian province in which I now reside, is gas rich and relatively oil rich.

Alberta's 2005/2006 budgetted income from oil and gas (presented in April 2005) was $7.7 billion Canadian dollars. This was based on an average oil price of $42 USD per barrel and average gas price of $5.60 per gigajoule across the fiscal year.

On August 29th the provincial government will release its revised figures and analysts are now predicting that the oil and gas income could top $14 billion CAD. They also predict that this will continue for years to come.

Keep watching your southern borders m8 !

[Losing Faith]

Cheney Jan 2006:-

"Canada has WMD..."

[Harry Sacks]

New York Times, good oil article.

http://www.nytimes.com/2005/08/21/magazine...ccWqdOUMwHjRpVw

[Andrew McP]

New York Times, good oil article.

http://www.nytimes.com/2005/08/21/magazine...ccWqdOUMwHjRpVw

<{POST_SNAPBACK}>

Thanks for the link. The pages from 8 onwards covering an interview with a man who should know the oil industry as well as anyone else is very interesting.

Andrew McP

[FTBagain]

dom,

Very good find. Thanks. It does raise some inyeresting questions about the BoE economic assumptions in its' latest report! Oil prices are likely to fall back in the future but only if we reduce demand, either by using alternatives, having a recession or both.

I suspect both! If we are lucky!