Now wheat is rising in price along with oil

FROM THE REDACTION

In July the main news of the world economy was as follows: Oil price rose higher than 75 USD. According toexperts, in August it will be fluctuating within the limits of 76-71 USD/barrel.
G8 tries to save fuelAt the G8 meeting the rich countries declared that they would start taking actions aimed at reduction of the demand for transport fuel. However, President Bush’s administration profited in this case since in this aspect American cars and lorries did not have much supply.
They spoke at the G8 annual summit in St. Petersburg that the transport sector uses 2/3 of the world’s oil and its fuel consumption surpasses the general energy demand. It was written down in the energy communiqué that special attention would be paid to the transport sector. However, nothing was written down in the document about transport fuel’s high standards, which is a good news for Mr. Bush’s administration that is against broad demand for fuel, since it fears that production of less safe vehicles will be launched, as a result of which car producers will suffer financial losses. A few years ago the administration slightly raised the US transport fuel standards.
Energy experts and environmentalists maintain that there is the only way of fuel consumption’s reduction in the US – raising of fuel standards since gasoline use makes up 40% of the country’s daily demand for oil, which is approaching the level of 21 million barrels a day. Speaking about the standards, the President of GRACE Policy Institute, who took part in consideration of issues related to alternative fuel at the G8 meeting, says that, in fact, it is a compromise document.
The US is the largest oil consuming country, Americans drive the biggest lorries and it pays the lowest price among the industrial countries. American drivers often complain of the high price of gasoline – 3 USD/gallon, but it makes up almost a half of the sum which European drivers have to pay. Instead of high standards of fuel, the communiqué of the G8 calls consumers for purchasing of energy effective vehicles, including transport working on diesel fuel, and Mr. Bush’s administration welcomes this kind of measures in its energy plan. The communiqué also envisages the administration’s policy aimed at larger development of bio fuel and production of vehicles that will consume alternative fuel in future.
– A bad forecast for wheat yield in 2006-2007 (this year there will be a considerably smaller yield in Europe and North America because of the drought and the world is going to satisfy its demand by purchasing Russian and Ukrainian wheat. Not only the general price of wheat will increase, but that of the Russian wheat as well, which is the main supplier to Georgia. Proceeding from this, as we supposed before, the price of imported wheat will increase in Georgia and, correspondingly, the price of bread will increase in the third and fourth quarters of 2006 and in the first half of 2007.
– Positive indicators of Asian region’s economic growth – giving more freedom to Chinese yuan, which will cause rising of its price and more or less solve the problem of the trade balance.
– Fixation of growth forecasts in the industrial countries, except for Japan and increasing of inflation rates, reduction of the unemployment rate in Europe, though insignificant, compared to the corresponding period of the last year – 7.9%. Unemployment rate in the US makes up 4.6%, in Japan – 4.2%.
– The statement of the US Federal Reserve that, for the time being, they may refrain from rising of the interest rate (Chart ¹2), which at the end of the month brought down dollar’s exchange rate in relation to the major currencies, and at the end of the month it made up 1.2734 in relation to euro.
According to analysts, at the end of August dollar will sink again and reduction of American economy’s growth rates in comparison with the previous period contributes to it. That is why at the end of August dollar will sink by 1.9%-5.8%. The fact that European and Japanese importers, which are the main purchasers of dollars, are going on leave also contributes to it, and the rate of dollars’ purchases will drop.
– Sinking of gold prices, which, according to the data of American COMEX exchange are ranging from 640 to 650 USD per ounce, is also significant. According to the exchange’s analysts, it is expected that this price will rise in September-October.
– Also decreasing of yield on medium and long-term obligations (see Chart ¹3).
– One of the important results of the G8 meeting was Russia’s disappointment concerning its membership in the WTO, as well as elimination of the disbalance between the industrial and the developing countries. The eight main industrial countries ask for continuation of the deadlocked negotiation with the World Trade Organization. It is pointed out in their statement that they welcome the idea that the Director General of the WTO should render consultation with the purpose of reaching the agreement. They are also for lifting of trade barriers for the poor countries. However, nothing definite was said at the meeting of the leaders of Brazil and India with their G8 counterparts. The both leaders insistently demand that the concession of the rich countries should be included in the negotiations, so that the trade barriers for the farm products produced by their poor countries would be reduced. However, the two countries are under the pressure of the G8 themselves, the ask for reduction of barriers for the imported finished products.
The EU’s anonymous representative calls these actions “adding fuel to the fire” and emphasizes that it will not only give Pascal Lami a mandate for negotiations, but also means designation of the date.
Russia’s President Vladimir Putin directly pointed out that he is looking for the ways of the trade’s progress and said that the rich countries should reduce barriers for the import of traditional products, and that subsidizing of export at the state level should be stopped. Russia is going to join the WTO, but it became known that its negotiations with the US had been discontinued. The US is the only country, with which Russia has not concluded the agreement as yet, though the negotiation on importing of pork and beef from the US were disrupted on the basis of the disagreements on the sanitary inspection. Russian ministers pointed out that the agreement would be signed in October.
Russia collapsed in the negotiations on its entry into the World Trade Organization
There was a chilly atmosphere at the G8 meeting in St. Petersburg – President Bush blocked Russia’s entry into the WTO, while President Putin said with ironical smile that Moscow did not want a forced democracy similar to the one being implanted by the US in Iraq.
By joking and poking fun at each other the twp presidents, did not conceal their views on the explosions in Lebanon. Mr. Bush said that Hezbollah militants were to be blamed, while President Putin criticized Israel’s use of force and said that violence was inadmissible and should be stopped as soon as possible.
The two presidents had a two hours’ meeting before the beginning of the G8 summit. As it was expected, their conversation had to do with issues related to nuclear weapons, Israel and the actions of Islamic militants. Quick handshake and lack of warmth were observed at the beginning of the conversation.
Speechless criticism
In spite of the squabble, the tension and anger, which was not concealed at the meeting in Bratislava 17 months ago when President Bush sharply criticized the Russian President and blamed him for deviation from democracy , was not felt this time. After a difficult meeting Mr. Bush concluded that public criticism of Putin had no result, though he says that he made several proposals to the Russian President.
At the news conference the US President said that he had a wish to implement institutional changes in such part of the world as Iraq, where there is free press and religion. According to Mr. Bush’s statement, he told President Putin that his people had a hope for the right choice on Russia’s part. In the answer full of causticity Mr. Putin said that he sincerely admitted that Russian people did not want a democracy similar to the Iraqi one, which was followed by Mr. Bush’s blushing and unsuccessful smile. The Russian President emphasized that Russia would not take part in any “crusades”.
Firm negotiations
Mr. Putin’s wish is his country’s entry into the WTO. The US is the only country that has not put its signature to its membership in this organization, and Bush dissipated Putin’s hopes.
As to the negotiations, President Bush says that any agreement should be acceptable for the Congress. According to the statement of the American part, the negotiations failed to solve the problem having to do with Russia’s barriers to American beef and pork, they express their hope that they will reach the agreement within the period of several months. Added to this was the issue of relations between Georgia and Russia, which are abnormal in conditions of Russia’s complete trade embargo, and this is unbecoming for the country that is a candidate for entry into this organization. Russia wants to be an open trade country and declares a trade war to Georgia