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A considerable growth in oil demand will depend on high growth rates of the world economy. According to a forecast made by the US Ministry of Energy, economic growth rates in OECD countries are expected to account for 2.4% in 2005 ( as compared to 3.1% in 2004 and 2.1% in 2003 ). Economic growth rates in the United States are expected to account for 3.5 % in 2005 ( as compared to 4.4% in 2004 and 3.0% in 2003 ). The world demand for oil is forecasted to grow from 82,8 ml barrels daily in 2004 up to 85,0 ml barrels daily in 2005, or by 2,2 ml barrels daily in absolute terms ( in 2004, the world demand for oil was 3,1 ml barrels daily). The world demand for oil is expected to grow by 2.7% in relative terms in 2005 as compared to the previous year ( in 2004, world demand for oil accounted for 3.9% ), i.e. the world oil demand growth rates are expected to slow down as a result of slower growth rates in oil consumption in Asian countries ( OECD non-member countries ). A great deal of the forecasted growth in oil consumption is expected to fall to the share of OECD countries, primarily the United States, with the bulk of this growth still falling to the share of OECD nonmember countries. In OECD non-member countries, the demand is expected to grow be 1,6 ml barrels daily, or by 4.8 % as compared to the previous year. More than a half of this growth is expected to fall to the share of China and other Asian countries ( OECD non-member countries ).

World oil production is forecasted to increase by 2.4% in 2005 as compared to the previous year ( world oil production grew by 4.5% in 2004 ). In 2005, production of crude oil by OPEC countries ( including Iraq ) is expected to be slightly above the previous years average level ( 30,2 ml barrels daily against 29,1 ml barrels daily in 2004 ). At the same time, OPEC non-member countries are expected to increase oil production, because high world oil prices would encourage further expansion of production volume. Oil production by OPEC non-member countries is expected to be increased by 0,ml barrels daily or by 1.4% in 2005 as compared to 2004. The countries of the former Soviet Union ( Russia and Caspian region countries ), the United States ( by 1.9% as compared to 2004 ) and Canada are also expected to increase oil production. It is the first time over the last few years that the United States are expected to show oil production growth, which probably is encouraged by the effect of high oil prices. However, oil production at the North Sea oilfields is expected to further decline.

High level of oil production in OPEC countries encouraged build up of commercial stocks of oil in OECD countries in the first half of 2005. As a result, the level of stocks has approached the upper bound of variation range for this indicator over the last five years. At the same time, the stocks of OECD countries have not increased after changes in supply days ( number of days during which the commercial stocks can meet the demand ), since the oil demand has grown. The US Ministry of Energy has forecasted some growth in commercial oil stocks of OECD countries within the next two years. At the same time, the level of stocks, as changed in supply days, is expected to be close to the upper bound of variation range for this indicator over the last five years. Status of the stocks will therefore encourage high world oil prices in the short term.

As a result, according to the base option of the latest ( July 2005 ) forecast of the US Ministry of Energy, the world oil price, defined as the average price of oil imported to in the United States, is expected to be a at very high level of about 51,3 dollars per barrel in the second half of 2005, with an average of 47,3 dollars per barrel in 2005. Given the actual relationship between Brent oil price and the average price of oil imported to the United States, Brent oil would then cost about 57,5 dollars per barrel in the second half of the current year ( see Table 5 ). World oil prices are expected to remain extremely high in 2006. According to the forecast of the US Ministry of Energy, the average world oil price is expected to be 50,5 dollars per barrel in 2006. In this case, Brent oil price, as forecasted by the US Ministry of Energy, would be 56,5 dollars per barrel.

A number of other organizations forecast an extremely high level of world oil prices in the short term. Forecasts of the International Monetary Fund, the European Commission, the Centre for Global Energy Studies, Economist Intelligence Unit and several other organizations vary within a range of to 56 dollars per barrel. Forecasts of different organizations vary within a range of 45 to 49 dollars per barrel in 2006.

Hence, according to the forecasts of the leading foreign organizations, world price of Brent oil is expected to remain very high and may reach 50 to 58 dollars per barrel throughout the second half of 2005. This means that Russian Urals oil would cost about 46 to 55 dollars per barrel. At the same time, the movement of world oil prices will remain fairly uncertain due to several factors relating to the demand ( world economy growth rates, particularly in China and weather conditions ) and the supply ( oil production ). The policy of OPEC countries will have a material impact on world oil prices in the future. OPEC announced in June 2005 that OPEC countries would increase total oil production quota by 500 thousand barrels daily, up to 28,0 ml barrels daily since July 1, 2005. The increase in the total quota is applied to all quotas of all OPEC countries. In practice, however, it is only Saudi Arabia that has any significant idle oil production facilities. The Iraqi factor has a material effect on the foregoing uncertainty. Any considerable supply of Iraqi oil to the world market could influence a strong downward trend in world oil prices. An increase in supply of Iraqi oil depends largely on political stability, reconstruction and expansion of oil production facilities in this country, which is a time-consuming process.

Table Forecast of World Oil Prices in 2005 - 2006, dollars per barrel.

2002 2003 2004 2005 ( forecast ) ( forecast ) Price of oil imported to the United States*, dollars per barrel. 23,7 27,7 36,0 47,3 50,Price of Brent oil 25,0 28,8 38,2 53,5 56,*Original cost of refined oil.

Data source: U.S. Department of Energy/Energy Information Administration, authors estimates.

The foregoing forecasts and analysis allows Russia to expect the similar external conditions favorable for building up state budget revenues and the stabilization fund, as well as developing the oil and gas sector in the short term.

Oil Residual oil fuel Data source: calculated on the basis of the data from the Federal State Statistics Service.

Figure 1. Average Prices of Oil and Residual Oil Fuel Export in 1996 - 2005, USD/ton ............................60 45 30 15 0 ml tons (left scale) ml US dollars (right scale) Data source: calculated on the basis of the data from the Federal State Statistics Service.

Figure 2. Export of Oil and Oil Products in Physical and Value Terms in 1997 - 2005, million tons, million dollars.

Yu. Bobylev Administrative reform in the agrifood sector: results of the first year About a year ago large-scale transformations began all over the countrys administrative system including agrifood sector administration. The year-long implementation of the reforms provisions allows assessing its results. Two components of this reform are examined: shifts in the system of state administration and in the system of agrifood sector budget financing. The general conclusion is that there are actually no changes to the better; the reforms outcomes are basically negative. The latter are either being overcome or have to be urgently overcome in order to prevent their conservation in the future.

There is no formal definition of the currently widely utilized term administrative reform and everyone using it can mean something of his own. In the current survey we examine only two of its components the reform of agrifood sector administrative bodies on the federal and regional level and the reform of budget planning in the sector.

As to the reform of administrative bodies on the federal level two institutions were detached from the RF Ministry of Agriculture: one agency (Agricultural Agency) and one service (Rosselkhoznadzor Russian Agricultural Supervision). Besides, the new Ministry of Agriculture incorporated formerly independent Fishery Agency.

The principal idea of this reorganization was the separation of law making functions from the control and supervision ones. Theoretically this separation is quite justified but its formal application resulted in a rather absurd situation: only two specific functions were left for the Ministry of Agriculture the preparation of draft laws for the Government and the adoption of by-laws within its competence.

Other functions simply ensure the departments functioning: these are training of its own personnel, keeping of its own archive, securing the state secret, purchase of resources necessary for the Ministrys operation, etc. Well recur to this question below showing that this function as well has actually been annulated by the reform.

..................................Its obvious that the number of necessary federal laws regulating the agrifood sector is limited and sooner or later all of them will be adopted. The higher the quality of law making the less is the need to revise or supplement them. In this situation to demonstrate its functional necessity the Ministry will have to incessantly generate by-laws and control the effective legislations execution by agencies. The by-law making activity of the Ministry will result in either stronger dirigisme in the sector or in spreading of legal nihilism when market operators simply neglect departmental regulations. The recent decades experience shows that both are possible at the same time when intervention in the economy produces corruption rather than dirigisme.

As to the control over activity of agencies and the service the Ministry of Agriculture has actually lost manipulation levers. Even the federal budget funds for implementing agricultural policies are allocated directly to the respective agencies and service. Within the short period of existence these institutions have already demonstrated great independence. The Regulation on Ministry of Agriculturereads that it cannot fulfill control or supervision functions except for its structural divisions.

Agencies and Service are not structural divisions they are federal executive bodies. As a result the national agricultural policies got split between three (not counting the Fishery Agency that administrates a somewhat separate branch) departments each of which generates its own policy.

The world practice knows cases of creating specialized agencies in the agrifood domain. The most spectacular example is the Commodity Credit Corporation (CCC) in the US Department of Agriculture (USDA). Similar to the Agricultural Agency in Russia, its functions include intervention purchases of agricultural commodities (pledge transactions in the US case). However, this corporation is not only a structural division of USDA but also has not a single employee who at the same time does not work in USDA. Meantime the Corporation has its own separate budget, baseline program and competence. Still, the head of Corporation is a member of USDA staff and is totally subordinate to the Minister. This ensures coordination of the agricultural program at large.

The detachment of Ministrys supervision functions into a separate service seems to be the most rational decision. In compliance with RF Government Resolution No. 327 of June 30, 2004 the Federal service of veterinary and phytosanitary supervision (FSVPS) incorporated 6 formerly independent state supervision services: veterinary service, quarantine service, phytosanitary service, agrochemical service, hunting inspection and fishery inspection. Besides, after the liquidation of State grain inspection (RF Government Resolution No. 708 of December 1, 2004) the decision was taken to transfer its function to FSVPS. The State technical inspection service stopped operating on the federal level and was reassigned to regions.

FSVPS and its regional divisions perform exclusively supervision functions while rendering of services is transferred to Federations constituent members. In particular, on the federal level the veterinary service exercises control on the state border, control over inter-regional livestock products transit and supervision of regional veterinary services. The federal budget finances animal vaccination against about 40 diseases. Meantime regional veterinary services organize monitoring and maintenance of normal epizootic situation on their territory, prevent spreading of diseases inside and outside the regions borders (this work is supervised by the federal service) by carrying out prophylactic and anti-epizootic measures, e.g. vaccination against the 40 diseases vaccines against which are paid for from the federal budget. The work of regional services is financed from the Federation members budgets.

Commercial veterinary services are handed over to private businesses. State institutions solely license their activities.

This system has resulted in forming of two parallel veterinary services in regions the one for fulfilling regional functions and the other for exercising federal supervision. First, this implies the direct increase of state employees number that contradicts the reforms principles as it is. Second (and more important), this results in forming of parallel services in the situation of acute shortage of skilled personnel all over the agrifood sector. Thus federal institutions (being the new ones) will most likely be staffed by less qualified experts and these are the latter who will exercise supervision.

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