But just imagine if gasoline prices would increase tenfold. That's exactly what officials expect to happen to gasoline prices in Iraq.
Before I talk to you about that, I want to tell you about CERAWeek 2006.
The Biggest Oil Conference of the Year Begins Today
CERAWeek is the foremost gathering of senior energy executives offering new ideas, insight, and discussions on the major strategic issues facing the global energy industry. This year's event marks the 25th consecutive CERA executive conference.
The event involves a three-day executive conference, senior-level summits, and other special events.
From its humble beginnings as a one-day gathering with 75 attendees, CERAWeek has grown into a world renowned event, drawing 1600 attendees from more than 55 countries.
Today's speakers will discuss the crucial geopolitics, access to opportunities, and refineries' role in shaping energy security around the world.
Keynote speakers will include Ali Ibrahim Al-Naimi, Minister of Petroleum and Mineral Resources, for the Kingdom of Saudi Arabia, Jeroen van der Veer, CEO of Royal Dutch Shell, and Fu Chengyu, Chairman and Chief Executive Officer of CNOOC Limited.
Tomorrow, speakers from across the energy industry spectrum and around the globe will examine natural gas markets and provide perspectives on world energy issues.
They will discuss the international pressures of the liquid natural gas trade, the role of Asian suppliers and Asian demand, trade and risk management, and how renewables fit into the need for power.
On CERAWeek 2006's final day, electric power takes center stage.
With blackouts in Europe, Asia, and North America affecting governments' and consumers' sense of security, the critical issues in supplying power have a long reach.
Behind the days' plenaries and industry forums loom the questions of how much power will be enough, and where the financing for new infrastructure will come from.
Base-load generation choices, options for electric power investments, emissions programs and costs, and Europe's changing opportunities for power prompt thought-provoking discussions.
However, I bring up CERAWeek for one important fact. This conference will have an effect, positive or negative, on the tone for the energy markets for the rest of the year.
Our resident energy expert, Mike Schaefer, believes that oil prices will continue its rise... heading to at least $80 near term... then to $105 a barrel in the next 3 years.
However, if history is to be a guide, reaching $105 a barrel could happen in July 06 rather than July 09.
Iraq plans tenfold rise in fuel prices in 2006
Back in November Iraqis were paying 20 dinars (USD$0.014) per liter. For those of you like myself who are baffled by the metric system, that's a little over a nickel for a gallon of gas.
A nickel for a gallon of gas is cheap to you and me. But the average annual salary in Iraq is only about USD$1,500. So it's all relative.
In early December Iraqi gasoline prices increased by 200% to 50 dinars (USD$0.034) per liter, or $0.13 per gallon. This increase ignited protests and created friction between the oil ministry and the government over external political pressure.
Iraq defended this increase saying it was aimed trying to stop the smuggling of Iraqi oil to other countries and fight the black market.
But Iraqi officials plan to increase prices further. This time they expect to increase prices tenfold!
Over the next 12 months Iraqi officials plan to gradually increase the price of gasoline to about 600 dinars (USD$0.41) per liter, or USD$1.55 per gallon.
The increase is designed to meet the demands of the International Monetary Fund who said the prices should be equal to the prices in neighboring countries
In late December Iraq won a crucial loan accord with the IMF and a $14 billion debt swap with private lenders.
The $685 million IMF standby credit arrangement is designed to support Iraq's economic program over the next 15 months.
Iraq has the world's third largest known oil reserves. But decades of war, sanctions, under-investment and now widespread violence and sabotage have left it critically short of fuel. Now it has to import nearly half of all its gasoline.
- Luke Burgess
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