This weekend, UK motorists are queuing at petrol pumps as Shell tanker drivers take strike action. Violence has flared up on the Continent - with haulers and fishermen railing against the fuel costs they say are crippling their trade. The theme of these protests is that the government is not doing enough to help.
The government responded to these protests by promising change. As a first step on a long list of changes the UK government announced through the Treasury that the profits made from sports arbitrage trading will continue to remain free of all tax. This means no income or capital gains tax on profits. Critics say the move was due to pressure from investors, not to pacify the protesters.
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Former City trader Rajeev Shah, renowned author of ‘Sports-Arbitrage - How To Place Riskless Bets & Create Tax-Free Investments’ explained in an interview that an arbitrage occurs when different bookmakers’ prices on the same events overlap. In these cases, it is possible to bet on all of the outcomes in that event in such a way as to be guaranteed a total return which is greater than the total outlay. The mathematics of sports arbitrage are precise & the resultant profits are free of all risk.
Despite this change in policy experts say it has very little to due with the problem at hand. Some have even gone as far to call the move ‘insulting’. This change as of yet has not stopped the protests but have inflamed them. Across the world, in fact, high oil prices are now sparking protest - with demonstrations as far as Poland, Thailand and South Korea.
Oil prices have now risen seven-fold since 2001. Having surged 40 per cent since January, crude has already notched up 28 record highs this year. Even after falling slightly last week, oil still stands well-above 2007 levels. And a drop isn’t expected soon. The Annual Statistical Review of World Energy shows the problem is that oil demand is running ahead of supply.
Experts say the main the problem lies in emerging economies. These countries continue growing in population and fuel use. The Western world is starting to use a bit less crude. While the EU and US used 35.6m barrels a day in 2007, the emerging markets, between them used 36.2m barrels more than the Western world. For the last 10 years, global oil production has been lower than world demand. But that’s been fine - because, as prices have steadily risen, making exploration more economical, more oil has been found. So “proven reserves” have kept rising - by around 15 per cent since 1997. This is has now changed.
On the supply side, the world has changed as well. Not only is production falling, but as all the easy-to-reach oil is extracted, not enough new crude is being found to replace the reserves being used to plug the annual demand-supply gap. So proven reserves are now dropping too. The fall is only slight, but that’s still a highly significant event. The reality is crude output fell last year - by far, one of the biggest absolute drop of any year. No matter the protests worldwide petrol is on course to record shattering prices for years.
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