Portfolio Business


are to be maintained at a time when costs are being reduced.” Te report made five recommendations:


Commission strategically It said that the government needs to adopt a more strategic approach to commissioning public services: “Services should not be designed or delivered on the basis of administrative and geographical boundaries, but rather commissioned collaboratively with the service user in mind. Central support and co-ordination for key public service partnerships would bolster this move towards intelligent service design and provide an important source of accountability for taxpayers.


Create a level playing field for all providers “Competitive markets bring value and can help to achieve the cost reductions urgently needed,” said the report. “For this to happen, however, the market needs to be free and fair. All providers must be able to compete with each other on an equal basis – without any institutional, fiscal or other advantages given to any one market sector. It said that the government must urgently reform VAT treatment and public sector pensions, and address other barriers to competition in the public services market.


Ensure public service decisions are made on the basis of the best available data Te report argued that reliable and up-to- date information based on sound needs


Beyond the headlines The price of oil


Oil will rise to a higher average of more than $86 a barrel this year, according to a Reuters report published at the end of last month. That prediction was $3 up from November’s poll on the expectation of declining inventories and quickening demand growth. The third consecutive month of higher poll predictions was due to strong demand from Asia and more modest spare output capacity growth, analysts said. “We anticipate that oil prices will remain robust in 2011 as demand from thirsty developing nations continues and inventories are tapped,” said Lloyds Bank Corporate Markets’ senior oil analyst Simon Cooke-Yarborough. Most of the 33 analysts, banks and government agencies who contributed lifted their forecasts. “As inventories decline alongside simultaneous demand growth, possible supply disruptions due to geopolitical instabilities remain prevalent, and OPEC keeps targets steady it seems higher oil prices may be on the horizon for the first quarter of 2011 and beyond,” said Daniel Hwang, Gain Capital Forex.com’s senior market strategist.


58 Holyrood January 2011


analysis is required to guide decision-making on public service design. Benchmarking value in projects and comparing within and between sectors can show decision-makers what types of project are producing the best outcomes. Tis information can also give service users the full picture on what services are commissioned and why, it said.


Embed commissioning skills Some areas of public sector commissioning suffer from poor skills, said the report, including those for pre-procurement, competitive dialogue and contract management functions. “If public service delivery models are to achieve the outcomes they are capable of, the government must address this.” An NAO study on commercial skills for complex projects has already made recommendations in this area: these should be applied to all spending departments and commissioners, it said.


Strengthen dialogue with providers from all sectors Embracing new ideas from providers and creating channels of communication that allow for innovation to emerge is the hallmark of good market management. Conveying a commitment to policy continuity and future procurements is also essential for attracting suppliers and giving market confidence, said the report. Is the culture changing to allow for more


mixed provision of public services? “Talking to officials, there is a willingness to embrace


competition and a variety of providers,” said Fells. “Tat said; there are still potentially strong pockets of resistance. How that’s going to play out over the next few months when the cuts begin to bite from April onwards we are going to have to wait and see.” But Fells believes that at the level of the citizen user, there is increasing acceptance: Tere are certainly cases where delivery can go wrong, whether it’s a public, private or third sector provider, but when you bring it down to that ‘customer’ level – if they are getting a good service at a cost that is acceptable then they are not focused on who is delivering the service. “Perhaps this is where the government’s


‘big society’ agenda comes in; how does that landscape look down the track? In empowering individuals to make a difference in their own lives and empowering communities to support them in that, a lot of the talk from politicians is about the role of social enterprises and mutuals in delivering that agenda. We think there’s a real role for social enterprises and mutuals to help fill the gap. But if the state is going to withdraw from the delivery of public services to a large extent, which it has to because it just cannot afford to continue, then I don’t think social enterprises or mutuals alone have the scale or the scope to fill the vacuum. Government should recognise that the skills, the scale and the finance of the private sector is going to be necessary and that it’s a question of working out how the sectors can link up effectively.”


analysts and investors than the chance to put on a Chicken Little costume, jump on a soapbox and predict huge increases in price of crude oil, the world’s most widely used commodity,” he wrote on seekingalpha.com. “The complexity of the graphs and charts always makes me smile since oil prices have been relatively predictable for decades, and there are no unseen forces at work that are likely to change the fundamentals. “If you look at a long-term chart for oil prices the normal trading range was basically flat until the late 90s, when Asian growth took off. Since the resolution of the Asian financial crisis, a new upward sloping price channel has


Demand will grow by six to seven million barrels per day over the next five years, according to Deutsche Bank’s chief energy economist Adam Sieminski, while non-OPEC supply will rise by only three to four million barrels per day. “Spare crude capacity in OPEC is likely to shrink in the absence of a strong ramp-up in Iraqi production, in our view,” Sieminski wrote in a note. “We believe these trends increase upside price risk over the medium term.” Such a rise threatens the global economic recovery, according to some. But, says energy analyst John Petersen, there’s no need to panic: “Nothing is more appealing to bloggers, financial


established itself and except for the 2008 spike and the 2009 trough, oil prices have consistently stayed within the channel. “Today most pundits are predicting $100 oil in 2011. It could happen, but not without a lot more strength in the global economy. Today, oil prices are clinging stubbornly to the bottom of the price range and I can’t see any economic forces on the horizon that will drive them toward the top of the price channel.”


http://seekingalpha.com/article/242683-chicken-little- and-oil-prices


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