Oil Price Rises Above $117 a Barrel.

This is more a note than a comment, to the effect that oil prices in Asia have exceeded $117 a barrel. This latest increase in the relentless rise in the cost of crude is blamed on an attack on an oil-pipeline in Nigeria. There have been remarks that OPEC will not push-up production and this belief is likely to bolster an increase in the price of oil. Shell has confirmed that a bomb had caused a leak in the pipeline for which the Movement for the Emancipation of the Niger Delta is believed responsible. This group have been assaulting the Nigerian oil-infrastructure since 2006 which has led to a decrease in production by 25%, thus urging oil prices. Nigeria is a major exporter of oil to the United States.

The pipeline has been isolated so that repairs can be carried out. The weaker dollar has also contributed to the rise in the price of oil above the $100 psychological-barrier. As the dollar falls, it brings investment in hard commodities like oil and gold, in an attempt to hedge against inflation. Simply too, the fall in the dollar makes these commodities cheaper for foreign buyers. The Secretary-General of OPEC has promised that it will not hesitate to ramp-up production if it is thought the higher prices are due to oil-shortages, but he noted that simply producing more oil will not bring its price down. For comparison, Brent crude is selling at just under $114 a barrel. I dare say we will see a parallel increase in fuel prices at the pumps.

The provision of fuel in Scotland is under threat too, by a strike over pensions. It is debatable how much any of us will get as a pension, if anything at all, especially in 10 - 20 years time, smack into the oil-dearth era, especially as unstable financial markets as we see them now will most likely oscillate in perpetuity. As the swings become more extreme there is a danger of panic on the markets which could bring some organisations, financial and otherwise to the verge of bankruptcy. I hope not, but I note that the British government is borrowing £50 billion ($100 billion) to prop-up the banking sector.

The Chief Executive of Ineos, who own the oil-refinery at Grangemouth, said that the union, Unite, was well-aware that a 48 hour strike will cause fuel-chaos across Scotland and northern England at this, the only such facility in the region. Rather like blast-furnaces, used to smelt iron-ore and make steel, oil-refineries cannot be simply switched off and on again. It can take weeks to get them up and running again, and sometimes some reconstruction is necessary. Like light-bulbs they are best kept burning! The Ineos workers are opposed to proposed changes in their pension-rites, particularly the ineligibility of new workers to a final-salary scheme. I expect a long battle ahead over fuel and pensions in the next decade and beyond. If the Grangemouth refinery is closed, it might take a month to get it back and running again.

The facility refines 200,000 barrels of oil daily which yields 9 million litres of petrol (gasoline). Farms and the haulage industry are expected to be hit hardest by the fuel shortages that will result if the 1,200 workers go ahead with their strike, while prices will increase as supplies become scarce. The result could be that the entire north-country, including Scotland is brought to a virtual standstill.

Related Reading.
[1] "Oil prices spike to record above $117 a barrel." By Thomas Hogue. http://news.ino.com/headlines/?newsid=689062697300
[2] "Strike threatens UK oil supplies." http://guardian.co.uk/business/2008/apr/20/oil/print
[3] "Grangemouth strike threatens oil crisis." By Ian Robson and Sarah Robertson, Sunday Sun. http://www.sundaysun.co.uk/news/north-east-news/2008/04/20/
grangemouth-strike-threatens-oil-crisis-79310-20789958/