For the sake of my country I had hoped I was to be finally proved wrong on Miriam Dalli’s horrible gas trade when yesterday during the morning, gas prices surged around 15% higher. Miriam Dalli’s gas trade is still in the red because oil prices have fallen by just 11% while gas prices have fallen by 60% since her trade was made. There is still a lot of room for oil to go lower and gas to go higher to close the gap of the pseudo-hedge Miriam Dalli made. For Miriam Dalli’s trade to go green, she needs oil prices to go at least 40% lower than gas prices at these levels.ย As of now, Miriam Dalli would need oil to go to around $55 per barrel and even lower for her trade to be profitable. Oil is currently at around $84 while gas prices are around $3.5.
In theory, oil can definitely go below $55 (and it also should) but this depends on the practical mechanics of the oil market which is undoubtedly, one of the most cartel-like and rigged markets in the world with OPEC nations mainly Saudi Arabia and Russia controlling supply and output in accordance to their price needs. In reality, Saudi Arabia pumps oil through Aramco for as cheap as $5 and likewise, Russia still makes huge profits with the roughly $60 price caps imposed by the EU. Through the past two years, Saudi Arabia has made persistent efforts to restrict production to keep oil prices high, and the West has so far refused to react or fight back against this price manipulation in a multi-pronged manner in a similar way it did to gas prices. Saudi Arabia and oil-rich nations are also very aware of the West’s disinclination to burn oil for energy, and naturally, this is a weakness that Saudi Arabia is exploiting. So far, they seem to be successful in their price war.
Miriam Dalli has made a horrible trade in future gas purchases that may soon cost the government north of ย1 billion in wasted funds. Robert Abela is telling the public that energy bills are relatively low due to government subsidies and this is partly true only that most of the government subsidies on energy are going to pay for Miriam Dalli’s premium and not to offset market energy prices versus electricity bills.
Yesterday, I was in a long conversation with an official who works closely with the Minister for Finances. I was told many things about the budget and public finances, but most importantly, I was informed that Clyde Caruana is genuinely concerned about the state of public finances and wants to find ways to end the excessive energy subsidies, which cost the public purse as much as ย350 million per year. Clyde Caruana also faces difficulties trying to balance the budget and prefers the safe option of cutting expenditure rather than increasing it. However, he is still being compelled to increase spending against his wishes, even though he still needs to make drastic cost-cutting measures to prevent an overshoot in expenditure.
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