Whom is the government deceiving?

World oil prices have reached their highest point since the Sept. 11 terrorist attacks. Oil has been traded from $26.8 to $27.3 per barrel for the second day already on the London Stock Exchange. Traders are under the effect of Israel’s continuous opression of Palestine, and they are apprehensive of American and British threats of an offensive against Iraq and the OPEC intention not to lift the limits on oil production until October 1. Against the background of the reviving economies of the USA and Europe, which consequently require more energy supplies, traders say their may soon be an oil deficit. Clients are ready to pay more for oil already, as they expect price increases in the following months. The Vremya Novostei newspaper reports that, if Russia increases oil exports, it may change the trend.

On Friday, Russian Prime Minister Mikhail Kasyanov is to meet with the presidents of Russia’s largest oil companies to discuss oil export volumes for the third quarter, the minister told journalists. In Kasyanov’s words, the oil market has been stable for a rather long period already, which allows Russia to increase oil production in the third quarter. The present-day situation on the oil market is to be touched upon during the meeting. The prime minister and presidents of Russian oil companies will analyze statistics, exchange opinions on the situation, and finally make a joint resolution.

High oil prices are advantageous for all: to the government, which receives over 50% of the profit obtained from the export of energy supplies, as well as for oil oligarchs. The OPEC-coordinated reduction of oil export resulted in the flooding of the domestic market with oil products, which should have quite naturally reduced fuel prices, but nothing of the kind happened.

Whatt is more, fuel prices in Russia are to increase by up to 20%, Sergey Borisov, head of the Russian Fuel Union and president of the Moscow Fuel Association, said in an interview to Echo Moskvy radio. In his words, “within the nearest time,” prices for oil products will increase 10-15%, including petrol prices at filling stations. Experts say that “petrol prices are already increasing in 40 Russian regions, including Moscow.”

In its turn, an increase of oil prices will entail a total price increase in the country. Sergey Borisov says, that a “increase of fuel prices entails price growth for other goods. This is inflation typical of an unstable economy. Russia is experiencing this kind of situation now.” The expert thinks that the price increase “is economically grounded.” It was also added that “prices will be adjusted regarding the inflation rate.”

At beginning of May, the overproduction of oil products stopped in the country. Russian oil is actively exported, which is why the supply-demand balance has been established. Under such conditions, prices return to the limit that corresponds to a regular economic situation in this or that economic sector," Sergey Borisov says. “However, inflation is ruthless. Natural monopolies have already corrected the tariffs, but nothing of the kind was done in the oil sector.”

The statement contradicts yesterday’s appearance of Mikhail Kasyanov in the State Duma, when he said that inflation rate in Russia would not exceed 12-14%.

Dmitry Chirkin PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://www.pravda.ru/main/2002/05/16/41185.html