Tuesday, November 6, 2007

Higher Cost of Living in 2008

The world is less dependent on oil than it used to be, as industries have become more efficient and nations have diversified their sources of energy supply, but the looming possibility of the oil price reaching US$100 (NZ$130.37) a barrel and an immediate spike in prices for fuel in America is concentrating minds.

In real terms, oil has exceeded its previous peak in 1979/80, again a time of intense geopolitical tensions, especially between America and Iran. Taking into account the change in real per capita incomes, oil prices would need to hit around US$120 a barrel before it could be said to be close to approaching the level of pain inflicted on the world economy three decades ago.

The future does not look bright - "the feel good factor is slowly diminishing"

Tuesday November 6
Oil prices rose Tuesday on expectations of further declines in U.S. crude oil stocks, fueling concerns that supplies may be inadequate going into the Northern Hemisphere winter.

Market participants expect the U.S. Energy Department to report Wednesday that oil inventories fell last week, in part because of a suspension of output at Mexico's state oil company Petroleos Mexicanos, a major crude exporter to the United States

November 3: Crude oil prices broke fresh record highs this week, surging above $96 a barrel for the first time, on worries about tight global energy supplies.

OIL: The price of oil soared to new dizzy heights after news of tumbling crude reserves in the United States, the world biggest energy consumer. The market was also roiled by geopolitical tensions between Turkey and crude producer Iraq. New York light sweet crude hit a record high of $96.24 per barrel on Thursday. On Friday, Brent North Sea crude struck an historic peak of $91.87. It is clear that the market has $100 a barrel in its sights. Traders are concerned about tight global energy supplies heading into the northern hemisphere winter.

Crude futures moved sharply higher on Wednesday after the US Department of Energy revealed that crude inventories had slumped by 3.9 million barrels in the week ending October 26. The figures shocked the market because analysts consensus forecast had been for a modest gain of 400,000 barrels.

Reports from Indonesia

Harga Minyak Dunia Resahkan Pengusaha JAKARTA:-

Harga minyak dunia yang mencapai rekor tertinggi yakni 88 dolar AS per barel, dipastikan akan meningkatkan defisit APBN akibat kenaikan subsidi bahan bakar minyak (BBM) dan listrik. Kenaikan harga minyak dunia tersebut juga meresahkan dunia usaha, karena akan berdampak pada peningkatan biaya produksi. Akibatnya, dikhawatirkan akan menaikkan harga komoditas kebutuhan masyarakat.- Demikian dikemukakan pengamat perminyakan Kurtubi dan Ketua Umum Kadin Indonesia M.S. Hidayat di Jakarta, Rabu (17/10), menanggapi tingginya harga minyak dunia saat ini.

Bahkan, Kurtubi memprediksi harga minyak dunia bisa menembus 100 dolar AS per barel pada akhir tahun 2007 apabila Organisasi Negara-negara Pengekspor Minyak (OPEC) tidak melakukan penambahan produksi.

"Namun, kalaupun OPEC meningkatkan produksi, saya perkirakan harga minyak masih akan bertahan di atas 90 dolar per barel hingga akhir tahun ini," katanya.

Menurut Kurtubi, mulai Oktober ini, OPEC telah menaikkan tingkat produksi minyak sebesar 500.000 barel per hari, guna menekan kenaikan harga minyak dunia. Kenaikan harga minyak sekarang ini sangat disayangkan tidak bisa dimanfaatkan secara maksimal oleh Indonesia.

Sebab, menurut Kurtubi, saat ini produksi minyak Indonesia sedang mengalami masa terendah selama 30 tahun ini dan diperparah dengan melonjaknya biaya cost recovery yang mencapai titik tertinggi dalam sejarah perminyakan nasional.

Menurut dia, dengan membandingkan rata-rata harga minyak tahun lalu yang berkisar 66 dolar AS per barel, maka rata-rata harga minyak 2007 akan berkisar 67-78 dolar AS per barel. Namun, menurut Maizar, jika harga minyak menembus 100 dolar AS per barel maka dampaknya amat besar terhadap perekonomian dunia.

"Jika sampai menembus 100 dolar AS per barel, maka permintaan minyak akan turun karena industri tidak mampu mengonsumsinya. Dampak berikutnya, industri akan berhenti beroperasi dan perekonomian akan mandek," ujarnya.

Ketua Umum Kadin Indonesia M.S. Hidayat mengatakan, kenaikan harga minyak mentah dunia akan memukul APBN, karena ketergantungan impor minyak mentah di Indonesia masih cukup tinggi. Menurut dia, produksi minyak mentah Indonesia di bawah satu juta barel per tahun, sedangkan kebutuhan mencapai lebih dari 1,4 juta barel, sehingga membutuhkan dana impor yang cukup besar.

"Meskipun harus beralih ke sumber energi lain, butuh waktu. Saya perkirakan, kita akan menderita dalam setahun kalau harga minyak mentah masih tinggi, sambil menunggu kesiapan energi alternatif," ujar Hidayat.

Ia juga memperkirakan, bila harga minyak terus tinggi seperti sekarang ini, maka akan memengaruhi target pertumbuhan ekonomi nasional. "Target pertumbuhan ekonomi nasional bisa tidak tercapai," katanya.

Kamar Dagang dan Industri Indonesia (KADIN)-Tahun 2006
Mengumumkan bahwa jumlah penganggur di Indonesia mencapai 50 juta orang dari sekitar 210 juta jiwa warga Indonesia .

Price Increase on Other Commodities

PRECIOUS METALS: The price of gold passed $800 an ounce for the first time since 1980. Gold futures for December touched $800.80 an ounce in New York on Wednesday. Prices have jumped by about a third in value over the past year. The precious metal benefits from a weak US currency as it makes commodities that are priced in dollars cheaper for buyers using stronger units.

On the London Bullion Market, gold prices gained to $796.50 an ounce at Friday late fixing, from $779.15 a week earlier.

Silver prices advanced to $14.32 an ounce at Friday late fixing, from $14.07.

On the London Platinum and Palladium Market, platinum prices dropped to $1,439 an ounce at the late fixing Friday, from $1,454 a week earlier. Palladium prices eased to $369 an ounce, from $370.

BASE METALS: Base metals prices were mixed amid worries that demand for commodities such as copper and aluminium will drop owing to cracks in the US economy.

Base metals will struggle in an environment of falling interest rates because economic growth is weakening. The strong rally in base metals over the past six years came amid rising interest rates which were a sign of strengthening economic growth, he added.

On Friday, the price of copper for delivery in three months fell to $7,465 a ton on the London Metal Exchange, from $7,870 a week earlier.

Three-month aluminium prices increased to $2,590 a ton, from $2,534.

COCOA: Cocoa prices climbed as the market digested factors ranging from a struggling dollar to crop quality and quantity.

COFFEE: Coffee prices rallied in London owing to tight supplies. We are in the midst of a bottleneck situation, Bouvery analyst Bruno Bouvery said.

GRAINS AND SOYA: Maize prices rose owing to record high oil prices. The commodity is used in the production of fuel which is cheaper than crude.

RUBBER: The price of rubber rose and was set to extend its upward trend owing to tight supplies and the rainy season in Asian producing countries which slows production, dealers said.

The era of cheap food is over

In Malaysia, the rising cost of wheat flour and its related products such as bread and noodles is causing anxiety to consumers. It’s the same bad news all over the world, and higher food prices are likely to stay or even

THE rising cost of wheat flour and its possible inflationary spill over to bread, noodles, cakes, biscuits and chapatti has been making hot news in Malaysia.

It was reported in The Star last Thursday that the price of wheat flour per kilo rose from RM1.70 to RM2.00 on Sept 15 and to RM2.60 on Oct 16. The Government has urged makers of wheat-based food products to restrain from raising their prices excessively.

It is the same bad news the world over. And wheat is only one example. The prices of many other food items are also going up.

In the world market, wheat and milk prices have risen to all-time high levels. Rice is at a 10-year record level. Corn and soyabean prices are also higher than their averages a decade ago. The price of meat has shot up in many countries.

The era of cheap food seems to be over. With demand exceeding supply, there is also concern of impending shortages, as stocks in warehouses decline, and as some countries restrict the export of their food.

We are used to some food prices suddenly going up and then declining again. This is usually due to output being affected by drought or crop disease, and indeed the present drought in some wheat-producing countries is one reason for the recent increase in wheat prices.

But this time there are also other more structural and long-term factors that suggest that the high levels of food prices will remain or climb further.

The first is the rising demand for many types of food in developing countries, due to population growth, rising incomes, and changing tastes.

China is often cited as an example of this rising demand, but there are also many countries where demand is outstripping local supply, thus increasing the pressure on world markets.

The second is the rising cost of inputs that go into producing food. Oil is the prime example. Its price has been shooting up; last week it hit a record of US$92 a barrel and there are predictions of its reaching $100 in due course.

This hits food prices in at least two ways – by driving up the cost of inputs such as tractor fuel and fertiliser, and by increasing the cost of transporting the food across oceans.

The third is the boom in bio-fuels, which is causing land that could be growing food crops to be used for producing crops for fuel.

The increased demand for bio-fuels is causing basic changes to agricultural markets that may drive up the world prices of many farm products, according to a June report by the Food and Agriculture Organisation (FAO) and the OECD (the developed countries’ think-tank).

Their Agricultural Outlook 2007-2016 said that temporary factors such as droughts in wheat-growing regions and low stocks largely explain the recent increases in farm commodity prices.

“But structural changes are underway which could well maintain relatively high nominal prices for many agricultural products over the coming decade,” said the report summary.

The most important change is “the growing use of cereals, sugar, oilseed and vegetable oils to produce fossil fuel substitutes, ethanol and bio-diesel.

“This is underpinning crop prices and, indirectly through higher animal feed costs, also the prices for livestock products.”

The shift of land use from food to fuel is ringing alarm bells. On Oct 26, the United Nations’ rapporteur on the right to food, Jean Ziegler, told a press conference in New York that there should be a five-year moratorium on bio-fuels “as it is a crime against humanity to convert food crops to fuel.

“Bio-fuels are driving up food prices at a time when there are 854 million hungry people in the world.”

Another recent FAO report on (“Crop prospects and food situation”) said that international wheat prices have risen sharply since June, hitting record highs in September, due to tightening world supplies, low stock levels and sustained demand.

The combination of higher export prices and soaring freight rates is “pushing up domestic prices of bread and other basic food in importing developing countries, and causing social unrest in some areas.”

Overall, developing countries are estimated to spend a record US$52bil (RM173bil) in cereal imports in 2007. Other highlights of the FAO report:

> MAIZE prices are well above last year’s levels, despite bumper crops, due to strong demand from the bio-fuel industry;

> THE 2007 cereal harvest will only meet utilisation levels in 2008, meaning that stocks will not be replenished. Cereal stocks will remain at very low levels for the foreseeable future;

> WHEAT stocks are “worrying.” Sustained demand amid insufficient production increase this year may cause world inventories to fall by at least 14 million tonnes to 143 million tonnes, the lowest in 25 years; and

> THIRTY-SIX countries are currently facing food crises.

With food prices on the rise, and with food insecurity increasing as stocks tighten or fall, many countries are already planning to increase their own production of food.

Since the prices of food imports are now so high, it is economically more worthwhile, for both farmers and the nation, to start or increase the production of various types of food crops.

Note:- Malaysia Prime Minister, Datuk Seri Abdullah Ahmad Badawi, has said his government will hold off on price increases for the rest of the year, but that in 2008 they would be “forced to take global trends into account”.