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Purchasing Oil - The Importance of Timing
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07 January 2009
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Oil is a commodity which is quite volatile in nature. It reached the staggering price of USD147 in August only to go down a few months later to less than USD60 in the second week of November. Oil is very seasonal, it usually peaks in the summer months (July /August) due to increased demand in travelling and transport, and in the colder winter months (January/ February) due to heating requirements. |  |
The government has recently increased the water and electricity rates as from October 2008. Hon. Dr. L. Gonzi defended this move as one that needed to be done in order to change the Maltese ‘I don’t care ’attitude to a more responsible one in water and electricity consumption. The opposition leader Dr. J. Muscat criticised the government by saying that such an increase in rates has been brought about due to inefficiencies in Enemalta Corporation. The reality is that being now in the shoulder months with oil prices in the USD50’s, the seasonally adjusted annual average price of oil can be around USD70, going down in the leaner periods and rising in the peak periods. Also, other external factors in particular economic growth and the supply of oil, undoubtedly effects the price. Dr. Muscat’s plausible idea is to buy oil at cheap prices as a form of cost averaging. Hon. Mr. T. Fenech in a recent interview aired on a PBS program stated his awareness that the price of oil might probably start to rise in the winter months. In this scenario of high volatility, the ideal situation is to create a policy whereby Malta can buy oil at acceptable prices in the shoulder months in order to supply our yearly consumption. |
This article is brought to you by Jean Claude Bugeja MIA CPA (CeFA). He occupies the post of Financial Advisor at Island Financial Services Limited. Contact details Tel: 00356 23855702 Fax: 00356 23855238
e-mail: j.bugeja@islandins.com |
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