FROM THE EDITOR About Georgian oil business and OPEC war

Dr. Emzar Djgerenaia

It’s incredible, but the fact is that a special meeting has recently been convened in OPEC headquarters (international oil cartel). The meeting dealt with oil business in Georgia and the danger threatening oil prices and positive trends in the world’s oil business.

It is really past laughter, and I will try to impart certain details to you. At the end of April and in early May Alan Grinspan, as he earlier promised, increased the rate by 0,25% to annual 3%. As a result, the exchange rate of dollar against Euro strengthened and stabilized at 1.294 instead of earlier 1.3102. The European bank left this measure without response and maintained the rate at the level of annual 2% – in the first half of 2005.
The growth of rate in US was 3,1%. The rate is 0,7% lower against that of last year’s fourth quarter, but much higher than the similar indicator of 1,8% in the Euro Union countries. Alan Grinspan is supposed to increase the rate up to 4% till the end of the year resulting in the dollar’s growth up to 1,25 Euro, since the Central Bank of the European Union is not going to increase the rate. I am telling you about this in serious as downward trend of oil prices observed at the end of April has lasted till present. According to all calculations, since OPEC has increased oil production up to 29.9 mln. barrels a day, Russia has increased the indicator by 11%, now making up 3,9 mln barrels a day, and on top of all, 2.2. mln. barrels a day are produced above Iraqi quota – all this is a guarantee that oil prices will decrease and business activity in the US will grow. In the meantime, incredible commercial oil reserves have been created. This was what the countries did in the course of 2004. The oil reserves made up 324.4 million barrels in the US only. This means that if no conditions impeding the oil price growth arise, the oil prices might reach 35-38 dollars per barrel. The world managed to curb the growth of oil prices and increase business activity.
And that’s what happens in Georgia in the meantime: in 2002 petrol prices were at the level of 1,2 laris per litre, in 2003 ? 1,25 and in 2004 ? 1,3. Today, petrol price is 1,58 laris. The dynamics observed in our country is shocking. Oil prices play a multiplicating role in the general system of prices, and their increase is imminently, in two-three months’ time, followed by the growth of essential goods prices. This leads to the fact that now meat costs 8 laris and price of cheese is no less than 7.5-8 laris. Besides, growth of oil prices is inversely proportional to business activity. It is noteworthy that with oil prices reaching 60 dollars in the world market, petrol prices remained unchangeable in our country. Yet, after world oil prices declined by 20%, the oil prices jumped by 20% in our country.
The OPEC meeting in Geneva did its best to explain this wonder. They cannot understand why oil business in our country develops in inverse direction to the world trends. Besides, as Geneva meeting participants said, petrol prices growth has been followed by growth of petrol consumption. Representatives of European Commission said, up to now cars have been imported to Georgia from Europe, but now our compatriots “skim the cream” off American auctions.
The given situation was described as the war waged by Georgia against OPEC as this organization steadily struggles for price decrease (if it does not, Saudi Arabia will increase oil output and will finally knock down prices, which will be much losing for them), but Georgian businessmen struggle for price increase. What will the rest of the world say to it that Georgians buy petrol at such a high price ? if Georgians buy, why others should not do it, – they will say it and try to increase the prices, but might suffer big losses as revolt might rise. These are the problems facing OPEC. But Georgian businessmen are not much worried by it, they are not going to abandon the trend and their purpose is that by the end of the year petrol price in Georgia should become much higher than in Europe – we should outstrip Europe in something at least. There is nothing to say ? they might be right. At this stage, OPEC’s extraordinary meeting ended in no result as Georgian oil businessmen did not give up their positions. I do not know when OPEC’s meeting is going to be held on this issue, but our oil businessmen will not for the world give up high petrol prices, rather a hungry wolf would give up a sheep.
Though, it is much easier for a sheep ? it will be eaten up without batting an eyelid, but our “petrol businessmen” will skin us gradually ? and then you will have only yourself to blame.
P.S. According to statistics, in our country a petrol tank costs one month’s salary ? 100 laris.