Romania Is Still to Take in the Oil Crisis

What seems to be a permanent hike in oil prices on world markets is bound to affect our domestic market too. Information, confirmed in part officially, give credit to such a development.

After reaching a historic high of 45 dollars a barrel, the oil price on world markets hovers around 44 dollars a barrel (o tone of crude has almost seven barrels). Lucas Papademos, vice-president of the European Central Bank, recently stated that the hiked crude price would affect the economies in the Euro-zone, yet the expected outcome is less serious than the one of the oil crisis in 1973. "The upward trend of the [oil] price in recent months will definitely influence the economies [of the countries] in the Euro-zone," he said.

Most Romanian exports go to Euro-zone economies, and this makes domestic analysts cautious regarding the effect of the European developments on the growth of the Romanian economy. "It cannot be a good thing that high European officials try to calm down business communities with saying that things are better now than when they were awful," said the analyst of a Romanian bank in which the control stock belongs to European shareholders.

ECB estimate show that the inflation rate in the Euro-zone would go up with 0.1% in each of the following three years, slowing down the economic growth by 0.05% in the first two years and by a further 0.1% in the third year. If the crude will stay at over 40 dollars a barrel, then the inflation in the Euro-zone would go beyond 2% by the year-end, though the ECB target was lower than that. And the crude price seems to have settled itself to stay over the 40 dollars per barrel mark.

The American analyst Philip Verleger believes that Iran alone could bring the crude price to between 60 to 80 dollars per barrel with simply turning the export taps off. This action would be highly probable in case the raw over its nuclear program it has with Western powers and the UN will turn ugly.

Dan Ioan Popescu, the minister for economy and commerce, said that the domestically extracted crude covers 70% of Petrom’s processing capacity, and this was why the hike of crude price on world markets does not go into the local price of gasoline in Romania. "We try to keep a balance and thus not reach big price hikes for gasoline and also sustain the planned economic growth," Popescu said. Not long after this statement, Gheorghe Constantinescu, general manager of Petrom said he would suggest the Ministry [of Economy and Commerce] to agree a price hike [as the state still is the majority stakeholder at Petrom]. The other actors on the oil market in Romania keep their eyes on the moves Petrom and the Ministry do, as they so often said they tune their price policies to the one of the market leader, which is Petrom.

Dragos Cabat, vice-president of the Association of Financial Analysts, believes that crude price hikes would trigger a general price hike in Romania too. "The rise of inflation in July is a first sign," Cabat said. "Petrom is mid-way down the road to privatization when the new owner cannot yet exercise full ownership rights. Thus, either it will hike the gasoline price placing itself on a non-competitive position, or will keep the price down and shoulder the losses. Either way, the management team could be blamed for lack of professionalism," Cabat added.