Oil price spike is fool's (black) gold
And the phenomenon is likely to continue, bringing a much needed increase in revenue to a government committed to austerity, key analysts say.
Earlier this month Prime Minister Marek Belka mooted the idea of a gasoline tax cut. A few days later, Finance Minister Andrzej Raczko indicated that the move may come if Polish refineries choose to cut their prices.
But the media have been quick to point out that previous proposals to cut excise tax - namely on alcohol - have been unsuccessful. Oil industry analysts go further, suggesting that the price spike is exactly what the young Belka administration needs for a revenue windfall.
"There is no better placed person to understand Poland's strategic oil needs and pricing strategy than Marek Belka, with his experience as the CPA [Coalition Provisional Authority] in Iraq," says Joseph Stanislaw, president of Cambridge Energy Research Associates. Indeed, Belka has had a year's experience in helping to run the attempted reconstruction of Iraq's oil-dominated economy.
"Prices at gas stations around the world tend to be 80 percent tax," says Stanislaw. "So one impact of raised oil prices is an increase in government revenue. Governments tend not to lower taxes to compensate for a crude oil price rise."
"There is an historical precedent for this," adds James Angelus, an American oil specialist based in Central Europe for the past twelve years. "In 1974, when OPEC raised prices by 400 percent, Western governments conveniently blamed Arab nations for increasing oil prices. They didn't reduce their massive taxes though, in fact they gained quite well from it. Petrol is a guaranteed source of state revenue because consumers have developed a dependence on it."
"The most important issue of the price rise is its duration," continues Stanislaw. "A short-term spike will bring a quick injection of revenue, but a long-term price stability at this level would hit some industries hard - of course the transport industries, especially aviation."
One commentator looks to longer-term fears as a driver of oil prices. "Post-September 11, energy prices have tended to be a rather accurate barometer of global political uncertainty," says Ilan Berman, vice-president for policy at the American Foreign Policy Council in Washington, DC and an expert on Central European geopolitics.
"In this context, rising energy costs today reflect international worries over a host of issues - ranging from difficulties in Iraq to mounting instability among the traditional Gulf oil suppliers, like Saudi Arabia," he adds.
But Berman argues that a major tran-sformation of the energy pricing model is now under way. "Traditionally, availability of supply - and cost - were the dominant considerations in energy demand and consumption," he says. "The security of that supply is now rapidly becoming an overriding concern."
The result, runs Berman's argument, is that consumers are more willing than before to absorb a higher price for what they view as long-term resource stability, which is "...an important opportunity for emerging non-OPEC energy suppliers."
Poland's integration with Central Asian/Caspian sources, thanks to the projected construction of an Odessa-Gdansk oil route (already associated with Chevron Texaco), therefore makes long-term strategic sense. The current price spike is an indication that the traditional rules of the 'Great Game' for oil are changing, and Poland is positioned to pick them up quickly.
"In Poland, the price rise has implications, especially for downstream," says Stanislaw. "Poland is a net importer, and higher crude prices tend to translate into higher petrol prices, so Polish refineries are doing well because of the imbalance between crude prices and product prices."
Nevertheless, if recent rises do not subside they should cause the government concern about the economic costs of the massive rise in taxation that is effectively imposed. In general, oil experts say that high petrol prices are unpopular with the electorate, limit economic activity and can cause a corollary rise in inflation.
An upturn in the world economy, led by the USA, and the rapid emergence of new consumers, such as China, are said to be greater factors in propelling oil prices than Iraqi instability. In the last twelve months alone, Chinese demand for oil has increased by 20 percent.
Saudi Arabia and Kuwait, two countries that Belka has had to deal with during his term in the Middle East, would be keen to increase oil production so as to ease demand-pull price inflation. However, some oil producing countries outside the Middle East continue to attempt to put the squeeze on wealthier, First World consumers.
OPEC dominates around 50 percent of crude oil production in the world and seeks to control prices by the release or withholding of oil reserves. However, rather than easing the world oil prices (or oil tax) problem, OPEC has indicated that production will be reduced in order to keep prices at their currently high level.
"OPEC often asks if they should be blamed for high oil prices when governments do not reduce taxes," comments Joseph Stanislaw.
But the problems in the Middle East that Belka has had to face on a day-to-day basis in Iraq will continue to haunt him as he struggles - amid parliamentary intrigue - to deal with a financial problem that was caused in the short term by events in the region he has only just left.
Iraqi production has been driven down by oil pipelines being subject to attack by insurgents. Though this has not in itself created a price-inflating reduction in supply, fear has. This fear arises from there being no evidence of the long-term viability of a pro-American 'New Iraq' capable of securing supply for the big Western consumers.
Crude oil prices have also been pushed up by the downstream industry (representing the vast majority of Poland's oil business) coming under pressure from Brussels' policy to produce new, more environmentally-friendly oil products.
However, Poland's downstream giant PKN Orlen achieved its highest-ever quarterly net profit this year, a figure of zł.397 million - almost 12 percent up on the same period last year. The company cites cost-cutting (i.e. staff reductions) rather than benefits from the high oil price situation as the reason for its profit surge.
Earlier this month Prime Minister Marek Belka mooted the idea of a gasoline tax cut. A few days later, Finance Minister Andrzej Raczko indicated that the move may come if Polish refineries choose to cut their prices.
But the media have been quick to point out that previous proposals to cut excise tax - namely on alcohol - have been unsuccessful. Oil industry analysts go further, suggesting that the price spike is exactly what the young Belka administration needs for a revenue windfall.
"There is no better placed person to understand Poland's strategic oil needs and pricing strategy than Marek Belka, with his experience as the CPA [Coalition Provisional Authority] in Iraq," says Joseph Stanislaw, president of Cambridge Energy Research Associates. Indeed, Belka has had a year's experience in helping to run the attempted reconstruction of Iraq's oil-dominated economy.
"Prices at gas stations around the world tend to be 80 percent tax," says Stanislaw. "So one impact of raised oil prices is an increase in government revenue. Governments tend not to lower taxes to compensate for a crude oil price rise."
"There is an historical precedent for this," adds James Angelus, an American oil specialist based in Central Europe for the past twelve years. "In 1974, when OPEC raised prices by 400 percent, Western governments conveniently blamed Arab nations for increasing oil prices. They didn't reduce their massive taxes though, in fact they gained quite well from it. Petrol is a guaranteed source of state revenue because consumers have developed a dependence on it."
"The most important issue of the price rise is its duration," continues Stanislaw. "A short-term spike will bring a quick injection of revenue, but a long-term price stability at this level would hit some industries hard - of course the transport industries, especially aviation."
One commentator looks to longer-term fears as a driver of oil prices. "Post-September 11, energy prices have tended to be a rather accurate barometer of global political uncertainty," says Ilan Berman, vice-president for policy at the American Foreign Policy Council in Washington, DC and an expert on Central European geopolitics.
"In this context, rising energy costs today reflect international worries over a host of issues - ranging from difficulties in Iraq to mounting instability among the traditional Gulf oil suppliers, like Saudi Arabia," he adds.
But Berman argues that a major tran-sformation of the energy pricing model is now under way. "Traditionally, availability of supply - and cost - were the dominant considerations in energy demand and consumption," he says. "The security of that supply is now rapidly becoming an overriding concern."
The result, runs Berman's argument, is that consumers are more willing than before to absorb a higher price for what they view as long-term resource stability, which is "...an important opportunity for emerging non-OPEC energy suppliers."
Poland's integration with Central Asian/Caspian sources, thanks to the projected construction of an Odessa-Gdansk oil route (already associated with Chevron Texaco), therefore makes long-term strategic sense. The current price spike is an indication that the traditional rules of the 'Great Game' for oil are changing, and Poland is positioned to pick them up quickly.
"In Poland, the price rise has implications, especially for downstream," says Stanislaw. "Poland is a net importer, and higher crude prices tend to translate into higher petrol prices, so Polish refineries are doing well because of the imbalance between crude prices and product prices."
Nevertheless, if recent rises do not subside they should cause the government concern about the economic costs of the massive rise in taxation that is effectively imposed. In general, oil experts say that high petrol prices are unpopular with the electorate, limit economic activity and can cause a corollary rise in inflation.
An upturn in the world economy, led by the USA, and the rapid emergence of new consumers, such as China, are said to be greater factors in propelling oil prices than Iraqi instability. In the last twelve months alone, Chinese demand for oil has increased by 20 percent.
Saudi Arabia and Kuwait, two countries that Belka has had to deal with during his term in the Middle East, would be keen to increase oil production so as to ease demand-pull price inflation. However, some oil producing countries outside the Middle East continue to attempt to put the squeeze on wealthier, First World consumers.
OPEC dominates around 50 percent of crude oil production in the world and seeks to control prices by the release or withholding of oil reserves. However, rather than easing the world oil prices (or oil tax) problem, OPEC has indicated that production will be reduced in order to keep prices at their currently high level.
"OPEC often asks if they should be blamed for high oil prices when governments do not reduce taxes," comments Joseph Stanislaw.
But the problems in the Middle East that Belka has had to face on a day-to-day basis in Iraq will continue to haunt him as he struggles - amid parliamentary intrigue - to deal with a financial problem that was caused in the short term by events in the region he has only just left.
Iraqi production has been driven down by oil pipelines being subject to attack by insurgents. Though this has not in itself created a price-inflating reduction in supply, fear has. This fear arises from there being no evidence of the long-term viability of a pro-American 'New Iraq' capable of securing supply for the big Western consumers.
Crude oil prices have also been pushed up by the downstream industry (representing the vast majority of Poland's oil business) coming under pressure from Brussels' policy to produce new, more environmentally-friendly oil products.
However, Poland's downstream giant PKN Orlen achieved its highest-ever quarterly net profit this year, a figure of zł.397 million - almost 12 percent up on the same period last year. The company cites cost-cutting (i.e. staff reductions) rather than benefits from the high oil price situation as the reason for its profit surge.
