Risky Assumptions

The government assumed the price of crude oil to be a mere US$40 per barrel in its 2006 Draft State Budget. Are they optimistic or naive?

August 23, 2005

THERE is something not quite right with the 2006 Draft State Budget. The government has assumed that the crude oil price will only be US$40 per barrel. However, the oil price has been on the rise in recent months, with predictions for a continuing increase until the end of the year, particularly with the onset of winter in the northern hemisphere.

This lapse is made worse by the fact that the government had previously responded to the trend in the

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