Arla Foods is losing millions of Danish kroner due to rising oil prices.

”We’re expecting the all-time high oil prices to add DKK 40 million to our costs for the coming financial year,” says Karen-Marie Katholm, Purchasing Manager, Operating Services, Global Purchasing. “This figure is based on the situation as it was in April and May when we prepared the budget, but it may well fluctuate.”

Since June, the price of a barrel of oil has reached a historic high of approx. 45 dollars despite attempts by the ten OPEC countries, which account for most of the world’s oil production, to maintain a price level of 22-28 dollars per barrel.

Several factors are impacting on the oil market. Unrest in Iraq and Venezuela, the fear of further terrorist actions and the potential collapse of the Russian oil giant, Yukos, coupled with strong demand for oil in the US and China have all contributed to the price explosion.

Arla Foods uses approximately 50 million litres oil and 100 million cubic metres natural gas per year, mainly for milk collection and distribution and, in the case of gas, process heating. The price of diesel has increased by approximately 11 % since April 2004.