Editorial | Wednesday, 08 August 2007
Last week was another worrying one for the world as crude oil reached a new record on the New York Mercantile Exchange of USD 78.41 per barrel, a high last reached in summer of 2006 after prices had been hovering between a low of USD 51 in January and a maximum of around USD 65 in April.
These huge prices have naturally had a substantial effect on the price of fuel oil, which has risen from around USD 200 per metric tonne in October 2004 to almost USD 400 per m/t in July 2007, double the price. Fuel oil is the type purchased by Enemalta for use in power stations and for sale to petrol stations.
The government, after taking the somewhat brave decision to increase the power surcharge from 17 per cent in 2005 to a whopping 55 per cent has mostly kept this surcharge in accordance with oil price fluctuation levels. Notwithstanding this, the latest rises in the price of oil have been somewhat cushioned by government’s decision to subsidise the surcharge rise by at least 25 per cent as with a current rate of 50 per cent, the surcharge is nowhere near the levels of 80 per cent in which it is supposed to be.
However with inflation at record low levels, such an increase in utility bills would have a crippling effect on industry and domestic users alike. Still, the decision to subsidise the surcharge will not solve the problem in the long run. The government needs to begin implementing an energy policy without delay and look into the possibility of truly harnessing the potential of alternative energy. Although wind energy appears to be beyond our reach both from a cost and logistics perspective, there is a lot of potential in the sun and heat area, which is far from exploited.
With lots of predictions indicating that oil prices will rise further, something has to be done fast to prevent public finances sliding into collapsible mode. Additionally, it has repeatedly been said that by 2012 at the latest, the Marsa Power Station has to close down. With most of the power generated still coming from that ageing but immensely serviceable plant, one can only guess what will happen after that date.
Government should also embark on an information blitz to educate consumers on how to save electricity. This should include a proper focus on unplugging electronic equipment and better and safer use of appliances, which would eventually save millions in power consumption over the years.
The continual rise in fuel pump prices is also of a worrying concern to industry. Diesel, the fuel, which is widely used in almost all industrial sectors has crept up by almost 5c per litre in the past three months, certainly an unsustainable increase that is putting heavy pressures on small businesses who are having to continually reduce their profit margins due to these ever rising costs.
Although the proposal by the GRTU to arbitrarily impose a surcharge to counteract the rise in diesel prices is slightly wayward, the situation is rather critical and gives cause for concern. The government continually keeps the tax rate on fuels at previously imposed levels and should consider some sort of rebate in this area to alleviate the continually rising price of diesel which has bow reached 42c6 per gallon, just a few cents less the price of petrol. Inertia is certainly not the solution and if another price increase is made in August (a highly likely prospect, given the international price trends at the moment), the situation will definitely have reached breaking point.
Rising bank profits – beneficial to the economy?
Last week, HSBC announced for yet another six-month period, record profits of around Lm 25 million, or a 25 per cent increase over the corresponding period last year. The international banking giant has truly transformed the former Mid-Med Bank into a money making machine that has set new levels in banking operations in this country.
The usual questions will now arise, was it profitable to sell Mid-Med in the late 1990’s for just over Lm 80 million? If one had to analyze tax receipts from HSBC since privatisation, one would find that the government has already reaped much more than the sale amount apart from the fact that the bank recouped its original sale price in a few years.
Still, there are qualms about HSBC’s charges policy, which is rather excessive in some quarters. For example, a copy of a cheque issued a couple of years ago cost a whopping 50c to retrieve. Charges have also gone up for bank drafts and transfers and also for returned cheques, which cost Lm 2 each time. Surely banks do not need these kind of charges to maximise profits which are already astronomical in any case.
08 August 2007
ISSUE NO. 498