25 SEPTEMBER 2002
With the prospect of an American and British-led war against Iraq growing more likely, international oil prices are also widely expected to surge to no small extent
But as the spectre of rising oil prices and the ensuing implications loom, the Economic Services Ministry remains confident that Malta is as well positioned as possible for such a hike.
Speaking to The Malta Financial and Business Times yesterday, a Ministry spokesman commented, "Over the last couple years Enemalta, as well as Air Malta, have been purchasing their fuel requirements on the basis of formulas that link the actual price paid to the average price recorded over the preceding few weeks.
"This has been found to be an effective way to guard against short term fluctuations in the price of fuel."
But while such pre-emptive action serves to brace against a major crisis, the long-term potential effect of an all out war with an oil producer of Iraqs calibre is difficult to gauge.
As the MES spokesman explains, "On the other hand, there is no simple recipe that can guard against longer term fluctuations, let alone the upheaval resulting from a full scale war, which is fortunately still hypothetical.
"If we look at past experience, the adoption of long-term hedging agreements by the previous administration led to a situation where, for a long period of time, Enemalta was buying its fuel imports at well over the international price."
On the international front, US benchmark crude oil futures have jumped to their highest level since February 2001, leaping 51c to USD31.22 a barrel, while North Sea Brent oil climbed 40c to USD29.53, its highest level since September 11 last year.
Adding fuel to the fire, Britain yesterday released a dossier setting out the case for action against Iraqi President Saddam Hussein, saying Iraq had the military planning to launch chemical or biological weapons at 45 minutes' notice.
Meanwhile, OPEC Secretary-General Alvaro Silva Calderon said Sunday that in the event of a severe supply disruption following any US attack on Iraq, OPEC can try to secure supply.
But if the conflict escalates too far, Silva said, "We just don't know what will happen in the case of a war. We can't guarantee secure supply because we can't foresee the consequences."
Many OPEC states blame recent high prices on Washington's and Londons talk of overthrowing Hussein. They pointed to analyst estimates of a so-called war premium that has hiked oil prices by USD2 to USD4 a barrel.