09.11.13 – Syria, Unrest in Egypt, and Spiking Oil Prices

Wednesday, September 11th, 2013 and is filed under Oil and Gas Current Events

September 11, 2013 –– Over the past several days we have seen the dramatic effect events in the Middle East can have on oil prices. As certainty grew that chemical weapons had been used against the Syrian people and US military involvement seemed to be on the horizon, oil prices climbed 6% near record highs over one week. Then as a diplomatic solution seemed possible, prices dropped 2% in one day on 40% higher than normal trading volume. The fact that Syria produces less than 1% of the world’s oil begs the question: Why did events in Syria affect pricing and trading so sharply?

The biggest reason seems to be fear of a “Domino Effect” whenever a situation in the Middle East erupts. Iran has threatened to escalate the situation beyond Syria’s borders if US military action is carried out there – an action that would certainly provoke further violence and possible disruption to production and pipelines in the region. The situation is compounded by political conflict and continuing violence in troubled Egypt, and the threat that access to the Suez Canal could be compromised. All of this unrest in the region makes it difficult to predict future production or possible disruption of supply lines.

As the situations in Syria and Egypt continue to evolve, oil prices will certainly continue to fluctuate. Analysts predict that easing of tensions could bring prices well below $100 per barrel, whereas international escalation of conflict could send the price per barrel skyrocketing to $150 and beyond. Continued expansion of domestic oil production, and subsequent easing of our reliance on Middle Eastern oil, may be our best hope of protecting our long-term economic interests.

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