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XCC(80)82
companies, the two oil companies involved and the Government.
14.
The company would charter the ship and arrange for the
financing and purchasing of a cargo on the spot market in the Arab
Gulf, on a one-off basis. It would then orm the cargo, arrange to look after it and ultimately sell it to the power companies.
Financing
15.
The most practical way of financing the cost of strategic supplies maintained in tankers for a short period would be by means
of a loan. As there might be difficulties in raising a loan for this purpose, it might be necessary for the Government to guarantee it, provided that the rate of interest properly reflected the strength
of such a guarantee. When it was decided to use the fuel oil, it would be sold to the power companies at cost with an appropriate adjustment to the fuel variation clause in electricity bills. Assuming that the
price of fuel oil continues to increase fairly rapidly, the additional
cost to consumers would not be great. In the case of fuel oil stored
on a VLCC, an annual increase of about a third in fuel oil prices would result in no extra cost to consumers of electricity (see paragraph 6 above). Experience in the recent past indicates that an increase of
this magnitude is quite likely. The main purpose of the stocks is, of
course, to give the community some insurance against disruption in
supplies and therefore costs involved should be judged from the point of
view of whether they are a worthwhile premium to pay for this insurance,
16.
The direct financial implications to the Government cannot
be quantified until more detailed worl: has been done.
Publicity and Public Relations Aspects
17.
The points made in femorandum XCC(80)64 about publicity and
public relations will be largely applicable to this proposal.
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