The Oil Price Crisis in Britain - Assignment Example

In the past few months the British media, print and electronic has been inun d with various reportage on the oil price crisis in Britain. The media provides concurrent as well as divergent angles on the subject depending on the editorial slant of each medium style-book also influenced by various external factors such as the political proximity of a media entity to some political front. This paper explores the various the manners and angles that have characterised the ways in which various media have reported or commented on the matter of the oil price crisis in Britain. There has been a notable pattern in the oil prices crisis reportage across various media to place the blame on Saudi Arabia which is the world's largest oil producer. In The Daily Telegraph publication (The Daily Telegraph: 20 June 2008), executive foreign editor Con Coughlin asserted that "as things stand, protecting their precious reserves, rather than providing the world with cheaper oil, appears to be their main priority". In a similar tone The Times' chief foreign affairs commentator Bronwen Maddox described the Opec summit in Jeddah "a Saudi show, to deliver a Saudi message" (The Times: 25 June 2008), stating that , "Before Sunday's meeting, King Abdullah bin Abdelaziz al-Saud said that the kingdom was resolved to prevent oil prices from rising 'in an unjustified and abnormal manner', while announcing an increase in production too small to have any such impact." In other twist , Con Coughlin, The Telegraph's executive foreign editor, argued that the country is operating to capacity in the article published in The Telegraph (The Telegraph: 20 June 2008). He mentioned that, "the Saudis announced their intention to increase production by another 500,000 barrels per day, which will bring total production to 9.7 million barrels - the kingdom's highest ever level. And that is about the upper limit of what the Saudis can produce for any sustained period." However, "the Saudis will only produce more oil if they believe it is in their interests to do so," The somewhat incongruous perspective by Coughlin presents connotations tending to place blame over the oil price crisis on Saudi Arabia. Other opinion slants presented in the media coverage of the oil price crisis in Britain have focused on the reality of rising demands for oil which has not been succored on commensurate production levels. The BP Statistical Review OF the world Energy quoted in the Energy and Capital e-letter for August 2008 presents that, "It's no secret anymore that for every nine barrels of oil we consume, we are only discovering one."(The BP Statistical Review of World Energy August 11th, 2008). The writer in the article mentions that there is unprecedented oil usage rate on a global scale which has not been sustained by any feasible production increase measures. "The world is addicted to oil. In just 8 years, it's projected the world will be consuming nearly 50,000 gallons of oil every second. By that time, the world won't be able to meet the projected demand... for one simple reason: We're using up oil at breakneck speed. And it's also no secret that official oil reserve numbers furnished by OPEC member governments have been fudged for years. The International Energy Agency (IEA) even admitted to knowing about some of OPEC's wizards cooking their books." (Opcit) The electronic title also provides some sweeping predictions in an advertising blurb aimed at getting readers to subscribe to the e-letter. Some of the predictions enlisted are; Why we're never going to see oil priced at $40 a barrel ever again, what we learned from the 1970s oil crisis, and where the future of oil really stands... How oil reserve supplies will tighten, prices will continue jumping, and the world economy will feel the squeeze... The 3 best ways to capitalize on the investment opportunities of a post-oil economy. In another reportage Independent columnist Dominic Lawson vindicated Saudi Arabia (and Opec) from blame in the current price crisis, writing that "far from operating as a restrictive cartel12 of the 13 members of Opec are pumping out oil at maximum capacity" (23 May 2008). The Saudis, being the 13th member, "are already producing well in excess of their official Opec quota." Lawson mentioned that an unchronicled production increase of 300,000 barrels per day "had no effect in halting the upward rush of the market price." Lawson's opinions here can be related to those he made in June 17 2008 in the same publication. In the Independent (Independent 17 June 2008) Lawson also stated that "oil makes hypocrites of us all," Lawson was making inference to the influence of politics in the high profile diplomatic visits Saudi Arabia by U.S President George . W. Bush, United Nations Secretary General Ban Ki-Moon and Britain Prime Minister Gordon Brown. "The strange thing is that there isn't an absolute shortage of oil in the markets," Lawson added that, "There's already a sufficient amount of the black stuff to go round to meet current levels of demand, as the Saudis have wearily insisted often enough over the past few months." An editorial in the Independent (16 June 2008) outlined some reasons for oil price crisis: "There is little doubt that speculation is playing some part in pushing up the price of oil to an unprecedented $140 a barrel. Yet the fact that inventories have been at normal levels suggests this is not the driving force behind price rises. Growing demand is the far more likely culprit." However, there was some suspicion felt about the Saudi role: "It is often asserted that Saudis still have vast oil reserves. But there is no independently verified proof of this. We have no choice but to rely on what they choose to tell us." In an article published by the British Broadcasting Corporation online on the 8th of June 2008, fears of global economy damages culminating from soaring on prices were presented as the chief agenda on of the world's leading industrialised nations meeting. According to the report The Group of Eight (G8) organisation met two days after a record one-day jump in crude oil to $139 a barrel. Efficiency, shared technology and the promotion of alternative power sources were high on the agenda according to the report. In the report it was also mentioned that disagreements surfaced on fuel subsidies, which the US and others feel have helped boost prices. In The Times Business news section, the title's international business editor Carl Mortishead gives some reasons for being skeptical about an increase in Saudi Oil production. "The truth is that the world doesn't need the extra Saudi crude. It's the wrong sort of oil - too sulphurous and viscous for refiners trying to produce more petrol, diesel and jet fuel." (The Times: 23 June 2008). In the editorial published in the same title (23 June 2008) there was once more the mention of the influence and interference of politics in the global oil issues. The inferences were made around Britain Prime Minister Gordon Brown's attendance of the oil summit that was held in Jeddah. "In attending the Saudi King's energy summit at the weekend, the Prime Minister colluded in a publicity stunt of the first orderThe clear intention was to convince hard-pressed British consumers that he feels our pain on energy prices and is doing his level best to bring them down." The editorial apportioned blame to several factors: "The sky-rocketing price of energy in Britain stems at least as much from his own government's tax take and the energy companies' profits as it does from the vagaries of the Saudi oil flow. If production is an issue, then the Iraq war is at least as much to blame. A prime ministerial call for national belt-tightening would be a more honest and dignified approach." In the Guardian (20 June 2008) publication industrial writer Terry Macalister rings some caution for Saudi Arabia. Macalister mentions that Saudi Arabia economy "and political stability" are "tied heavily to crude revenue". He particularly states that despite the billions in extra revenue, Saudi leaders are "worried the long-term impact of high prices will be to cause conflict with western countries that militarily and politically support the House of Saud," Macalister states, "The kingdom's rulers are also fearful that high prices will lead to lower demand as users switch to other fuels." It is of significant interest that on the June 16 2008 independent publication, the title's diplomatic editor Anne Penketh indicates that "it appears the Saudis are just as worried that record pricescould dampen growth in the industrialised West and lower demand, which would in turn hurt the kingdom". In an article published in The Herald (web issue 3223 in August 11 2008) Prime Minister Gordon Brown was reported as having stated that the oil crisis is now more than in the 1990s. Below is an extract from the publication. "Gordon Brown held out the prospect of a fall in oil prices after a trip to Saudi Arabia where he called for a "new deal" to promote clean energy and end the conflict of interest between oil producers and oil consumers. The Prime Minister said last night the current crisis was worse than the one in the 1970s and called for a "more balanced energy market". He urged oil-rich states to use some of the $3 trillion of extra income from the current hike in prices to invest in Britain's 100bn "green programme" - the building of more wind farms and nuclear power stations to help the UK meet its share of an EU target to generate 20% of energy from renewables by 2020. However, as Mr Brown was addressing ministers from the 35 major oil-producing and consuming economies, his political opponents were rubbishing any idea his mission would lead to a quick fall in petrol prices at the pump." (The Herald: web issue 3223 in August 11 2008) The same publication included an article mentioning the Alex Salmond is set to raise the issue of "Scotland's oil" and high fuel prices when he travels to London for a meeting with ministers of the devolved administrations and the UK Government. Below is an extract of the article. "Senior sources at the Scottish Government said the First Minister, concerned at how the high petrol prices were hitting Scottish consumers, would be able to raise the issue under the agenda heading of "financial issues" when he attends the Joint Ministerial Committee under the chairmanship of Jack Straw, Westminster's Justice Secretary. In a letter to Chancellor Alistair Darling yesterday, Mr Salmond insisted how estimates showed Scotland was currently subsidising the rest of the UK by 4.4bn because of oil revenue." In an article published by the Times Online the manufacturing input costs reportedly unexpectedly fell during July, following a decline in oil prices from last month's record high. Producer prices were however reported to be still 30.1 per cent higher than a year ago. According to article, analysts had expected that the price of manufacturing goods would rise by 1 per cent between June and July, after the price of crude oil peaked at $147.47 on July 11. "However, input prices fell by 0.6 per cent during June and July after oil prices reversed to their current $116.40. While oil prices began to decline towards the end of last month, the fall was not expected to have any impact on manufacturing costs until August. On an annual basis, producer prices fell slightly from 30.8 per cent in the 12 months to June to 30.1 per cent in the year to July. However, factory gate prices continued to rise, up by 0.4 per cent between June and July, according to the Office for National Statistics, as manufacturers passed on the high cost of oil and chemicals to their customers. Annually, the price of goods rose from 10 per cent in the year to June to 10.8 per cent in the 12 months to July. "(The Times Online: August 11 2008) In the article is was further mentioned that the core factory gate prices, which strip out food, beverages, tobacco and petroleum, rose by a record 6.7 per cent in the year to July - the highest since May 1981. "Today's figures were released ahead of new inflation data, due tomorrow, that is expected to show the Consumer Price Index has risen to over 4 per cent in July - ahead of June's 3.8 rate and double the Government's 2 per cent target. The Bank of England is also due to release its quarterly Inflation Report on Wednesday, when it is expected to admit that inflation is expected to reach 5 per cent this year, stamping out any short-term hopes of an interest rate cut. "(Opcit) Energy Economics Newsletter (11 August 2008) Source:http://www.wtrg.com/daily/crudeoilprice.html This timeline traces recent fluctuations in the price of oil and the contributing factors. (The figures are in U.S. dollars and have been adjusted for inflation.) Apparently the oil price crisis has triggered interest in all quarters across the social, political and economic national and international circles. The media has played a major role in shaping opinion around the causes of the problem, its dynamics a swell as the overreaching influence of politics on the matter. Business publications have provided wide coverage albeit from differing angles on the fluctuation of the oil price from the beginning of the year up to the phenomenal rise July. Salient media reportage angles have been characterised by blatant or elaborate criticism for the chief oil producer, Saudi Arabia whilst on the other end exploring the negative effects of the crisis across production and other sectors in national and international commerce. Reportage has also been centered on the pervasive effects on the reality of global inflation and its impact on the struggling economies especially in second world or developing economies. The current reportages are revolving around the phenomenal drop in the oil price around the reality that despite the oil price drop consumers are still paying the price. References BBC 15: 30 GMT, Sunday 8 June 2008 16:40 UK, Oil Crisis Dominates G8 Summit. Times Online August 11 2008, Manufacturing costs fall but customers pay the price The Herald Web Issue 3223 August 11 2008,Oil crisis is now worse than in the 1990s Free Energy and Capital Daily e-Letter August edition, Latest Peak Oil Crisis report Guardian News, Saudi horror sparks fear of Oil crisis Telegraph, Gordon Brown doesn't get the oil crisis The independent, Oil industry 'sleepwalking into crisis' Read More