Friday, May 30, 2008

Europe Fuel Protests Spread Wider

Europe fuel protests spread wider

Fuel protests triggered by rising oil prices have spread to more countries across Europe, with thousands of fishermen on strike.

Union leaders said Portugal's entire coastal fleet stayed in port on Friday, while in Spain, 7,000 fishermen held protests at the agriculture ministry.

French fishermen have been protesting for weeks, with Belgian and Italian colleagues also involved.

UK and Dutch lorry drivers held similar protests earlier this week.

The strike reflects anger at the rising cost of fuel, with oil prices above $130 (83.40 euros; £65.80) a barrel.

Trade unions say the cost of diesel has become prohibitively high, after rising 300% over the past five years.

Wholesale fish prices, meanwhile, have been static for 20 years.

Fishermen's leaders from France, Spain and Italy have been meeting in Paris to co-ordinate strikes and protests over the next three weeks in the run-up to a European Union fisheries ministers' meeting.

The protesters are calling for direct immediate aid for the fisheries industry, coupled with increased subsidies.

The European Commission said in a statement it was willing to show flexibility towards the industry but it has ruled out subsidies to offset rising fuel costs.

Short-term aid packages were acceptable as long as they were used to address structural deficiencies in the fleets, it said.

'Ruin for fishermen'

Several thousand fishermen marched on the agriculture ministry in Madrid, where they handed out 20 tonnes of fresh fish to members of the public in an attempt to draw attention to their ailing industry.

Many blew whistles and klaxons, and let off firecrackers producing red smoke.

The BBC's Steve Kingstone at the protest said he could see flags from Catalonia, the Basque country and Galicia.

One banner read: "Soaring diesel plus cheap fish equals ruin for fishermen." Another chided Prime Minister Jose Luis Rodriguez Zapatero: "You are sending us to the cemetery."

One union leader in Barcelona said the country's fishing fleet was at a standstill.

"Compliance is total. The entire Spanish coast is at a halt," Jose Caparros told AFP news agency.

The unions also say they could blockade ports, a day after French police forcibly removed fishermen blocking oil depots.

"We must mobilise like the French and if we have to block ports, we'll block them," Xavier Aboy, a union leader in Galicia, told AFP.

In France the authorities have offered 100m euros in aid, prompting some fishermen to return to work.

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At dawn on Thursday, French riot police cleared protesters from the Mediterranean oil depots of Fos-sur-Mer and Lavera, and a Total refinery at La Mede in the south.

On the same day police clashed with fishermen who burned tyres in the Atlantic port of Lorient, while hundreds protested in Quimper, Brittany.

On Friday, protesters blockaded the Channel port of Le Havre.

Hundreds of farmers have also been blocking oil terminals near the cities of Dijon and Toulouse.

In Italy, at least 5,000 fishermen are expected to strike, the main trade union Federcoopesca says. The government has already refused emergency aid to the industry.

But the BBC's David Willey in Rome says many fishermen are adopting a wait-and-see policy as talks with the government continue, and in the Adriatic ports the response to the strike has been mixed.

"No boats went out" in Portugal, a union leader there said, and in the central port of Peniche boat owners set up a barrier to prevent unloading.

Bulgarian bus drivers are also planning a one-hour strike on Friday, following protests by lorry drivers on Wednesday.

Story from BBC NEWS:
Published: 2008/05/30 12:55:14 GMT

Q&A: Record oil prices

Oil prices recently hit record highs above $135 a barrel and have doubled in less than a year.

Prime Minister Gordon Brown has called on producers to increase supply.

However, producers say that there is plenty of supply and blame the high prices on speculators.

Why are oil prices so high?

Economists will tell you that prices are set by supply and demand and, indeed, at the heart of the rise in oil prices are what are known as the fundamentals.

Demand for oil has been growing as Asia's power-house economies such as China and India fuel their rapid economic expansion.

At the same time, there are all sorts of worries about the supply of oil.

A lot of the world's oil comes from somewhat unstable countries, so every time oil workers are attacked in Nigeria or Iraqi oil facilities are damaged, people get concerned about the supply of oil.

So fundamentally, people are worried that demand may be growing faster than supply, and oil is such an important commodity that they are prepared to pay more and more for it if they are worried.

That all sounds pretty simple then

Well it would be if everybody had exact figures for the fundamentals that influence oil prices.

The problem is that nobody knows exactly how much oil there is in the ground, many producers are a bit cagey about admitting how much they have taken out and we do not know how much oil is in tankers being shipped around the world.

On top of that, we do not have reliable figures for how much oil most countries have squirreled away in case of emergencies or indeed exactly how much oil is being consumed.

So what determines prices is not the fundamentals but everybody's perceptions of the fundamentals.

That means that when proper figures, such as the weekly US inventories figures, are released, undue weight is placed on them because few countries are so transparent.

But other than that it's just like any other commodity?

Unfortunately not.

First of all there is the Organisation of Petroleum Exporting Countries (Opec), which controls 55% of the world's oil exports.

The idea is that its members only raise or lower their production when all the other members do.

It does not always work, but it certainly means that oil is not a free market.

Also, there is a finite amount of oil in the world.

The oil that has been taken out of the ground first is the easiest, and therefore cheapest, to access.

As oil prices rise, it becomes financial viable to spend more to extract oil that is in trickier places to mine.

But as the available oil is depleted, the price will naturally rise because it is harder to find and more expensive to mine.

In addition, when there is talk about supply being threatened by unrest in the Middle East or storms in the Gulf of Mexico, how much of a problem these factors will actually be is generally a guess.

So is it unfair to blame the speculators?

The speculators certainly have a part to play in all this.

To an increasing extent, financial institutions are trading in oil as an investment like shares or currencies.

They buy oil contracts in the hope that their value will go up before they sell them.

Alternatively, if they think the price will fall, they may sell oil contracts they do not have and buy them later, in time to settle the deal.

Even those who believe that the market is based on fundamentals accept that the participation of speculators has created greater volatility in the market.

Factors that in the past might have moved the price by a few cents could now move it by more than a dollar.

It has also given sudden relevance to factors that in the past would not have moved oil prices at all.

What sort of factors?

Events such as rocket testing in North Korea have been cited as reasons for the rising price of oil.

But it is hard to imagine how it could have any direct effect on its supply or demand.

In a market with such a serious shortage of reliable information, as long as enough people believe that a factor will affect the oil price, it will.

And in some cases the effect of factors have been reversed.

How can that happen?

Up until less than a year ago, a weakening US dollar would have been seen as a sign of weakness in the US economy, which would have meant that demand for oil was likely to fall and so the oil price would fall.

But recently, many traders have believed that some people are treating oil and the dollar as alternative investments.

So, if they think the dollar is falling they will buy oil instead and if they think oil is falling they will buy dollars instead.

Because people believe this to be the case, a negative relationship has built up between the oil price and the dollar.

Whether people are actually treating the two as alternative investments is no longer important - what matters is that people believe that they do.

But a market based on so little concrete information and so much belief is vulnerable to people changing their minds.

Story from BBC NEWS:
Published: 2008/05/29 14:14:55 GMT

Rising fuel prices: European views

BBC News website readers across Europe have been reacting to the continent's surging fuel prices, which have prompted blockades and strikes in Spain, France and the UK.
Read some of their comments below and send us your own experiences.


The price of oil is already affecting my lifestyle. I am forced to walk more to get to where I need to go, only using the car when compulsory. I am just buying a few litres of fuel at a time. Before, I usually filled the tank up, but no more.
Adgun Olosun, Ostbevern, Germany

The blockades have caused a fuel nightmare across France. We live in a small village 30 minutes from Poitiers and have been facing fuel shortages. People are panic buying which has led to most fuel stations running out. Our local fuel station has run out too. As it's 12 miles away I face another 20 mile drive to the next. Like some I didn't panic and rush out and fill up, but now with only a quarter of a tank left I don't think I can waste all that driving around trying to fill up.
Claire Brown, Menigoute, Deux-Sevres, France

It is not just the high oil prices which will force me to change the way I live but also the general costs of running a car. I will retire next year and had planned to buy a new smaller car. I am now planning to move into the city and go without a car altogether. Many people have been complaining about the rise in oil prices for some time in Germany but, judging by the traffic on the Autobahns, no one seems to be driving less. Not even warnings about global warming have had an effect.
Roger Pring, Munich, Germany

As an economist I understand that the current situation over oil prices is the only way to reduce petrol consumption and limit the damaging effects on the environment. As a result I cycle, despite the fact that here in Bulgaria we do not have special lanes and generally there are many accidents with bicycles on the road. Dangerous, but green!
Todor, Plovdiv, Bulgaria

Everybody but the richest will be affected by the rising oil prices. Personally I am affected because I am having to spend more money on food, transportation, clothes and so on. So many things depend on oil and it is impossible not to change the way you live.
Pavlin Lukanov, Sofia, Bulgaria

I'm affected as I ride a motorbike for fun and have a diesel guzzling 4x4 car. I pay horrendous amounts of road tax, despite the car being the most fuel efficient I have ever had, and having bought a diesel because it was supposedly greener. I'm looking forward to when oil runs out and I'll be able to use chip fat to power the car. I'm a little cynical about the Opec engineered oil prices, which are only benefiting the oil companies.
JC Lux, Luxembourg


I live in Berlin Germany where we have sidewalks, bike lanes and an excellent public transport system, which is affordable. As a matter of fact, I have never felt the need to acquire a driver's licence. Therefore there's no change in the way I live.
Daniela, Berlin, Germany

No, I am not affected. Either the oil is running out, or it isn't. If it isn't, there's no problem. If it is, I say we use it up in style and with gusto. I'm going to keep driving my big car as much as I can until petrol supplies either run out or become unaffordable. The alternative is to eke it out until we reach a point where motorists will only be allowed to drive their cars five miles a week, on designated days. Better to splurge now than end up measuring drops. Live with your foot on the accelerator, I say!
P J Molloy, Dublin, Ireland

My memory has served me well. Memory of the 1973 and 1980 oil shocks and ever since, I have tried hard to consider using fuel a privilege rather than a right. I am accustomed to using trains and cycling whenever I can. My car is very efficient and I drive it sparingly. There will be other price increases, such as foodstuffs, that will simply require adjustments, but no quality compromises. As a society, we have lived high on the hog for so long, mostly at the expense of others. No need to whine now.
M R, Munich, Germany

No it won't. Instead of flying I will take the train, since I hardly ever travel outside Europe anyhow. You can get almost anywhere in Europe by sleeper train in less than 24 hours. It's not that much worse than flying, and will only require a minor adjustment. I live in a city where you can cycle most places faster than driving and if it snows there is the metro. As for food, fresh produce has always been expensive and consumed a large proportion of my income, so nothing new there.
Matt, Vienna, Austria

Story from BBC NEWS:
Published: 2008/05/28 15:10:06 GMT

Who knows why oil prices are so high?

By Anthony Reuben
Business reporter, BBC News

Various reports have attributed the recent record breaking rise in oil prices to different reasons, but who is correct?

Some say it is because the Opec cartel is unwilling to boost its supply levels.

Others say it is because of fears about supplies from other countries such as Nigeria and Venezuela.

But the truth is, it could be something completely different.

The fundamentals

"Why did it happen on Tuesday? Nobody really knows for a fact what's happening or where it's going," says John Hall from the energy consultancy John Hall Associates.

So what is it that moves oil prices up and down?

"It's the fundamentals, stupid," says Mark Lewis from Energy Market Consultants.

The fundamentals are factors that influence the supply of, and demand for, oil.

Things such as the increasing demand from China and India, as well as fears that a stand-off between the US and Iran could interrupt supplies, have been raising oil prices.

Alternatively, financial factors may be at work, such as a hedge fund having to sell a particular oil contract so it does not end up receiving a tanker-load of oil - or a trader deciding it would be fun to be the first to trade oil above $100 a barrel.

The problem is, much fundamental information is not freely available.

No sense

"We really don't know what the fundamentals are doing at any point in time," Mr Lewis says.

"The markets are looking for signals from the fundamentals. Some of them are irrelevant, some of them are wrong, some of them are meaningless, but they affect prices nevertheless."

When the New York oil price broke through $100 a barrel for the first time at the start of 2008, one of the factors cited as being behind it was the assassination of Benazir Bhutto in Pakistan on 27 December 2007.

"That didn't strike us as making any sense at the time," says Sean Cronin, editor of Argus Global Markets.

He says that people are too keen to attribute market moves to geopolitical factors.

He attributes rising prices to over-optimistic expectations of oil production by non-Opec countries - and also to signs that Opec members appear to have a greater tendency to stick to their output limits.

'Can't sit around'

These long-term trends are all very well, but oil traders have to make quick decisions.

"You can't sit around a day or two and see what happens," says Mr Hall.

"So the rocket testing in North Korea [previously cited as a reason for rising prices] or the assassination of Benazir Bhutto turned out to have no real effect, but they might have done."

Some of the factors that are more likely to influence oil supply and demand, such as figures of oil demand from China, are not available.

That means that minor news of fundamentals, such as the output of a single refinery, may be given too much weight.

"Little changes in insignificant parts of the fundamental picture, if they're visible, can have a substantial impact on the oil price - substantial in the sense of several dollars," Mr Lewis says.

Dotcom boom

So there appears to be a distinction between the factors that raise the oil price because they affect sentiment and the ones that genuinely affect supply and demand for oil.

And it may be that rises due to the former are vulnerable.

"It's like the dotcom boom in the 1990s," says Mr Lewis. "It was overinflated, but as long as everyone kept believing in it, the price went up."

"When they stopped believing in it, the price went down. And that's a warning."

Story from BBC NEWS:
Published: 2008/05/22 13:37:24 GMT

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