Does re­gional in­sta­bil­ity dic­tate the price of oil?

The Kurdish Globe - - NEWS - By Dr Yadgar Ka­mal Ah­m­mad

To ex­plain that, if we check the news re­ports in the past 12 months, we clearly see an awein­spir­ing num­ber of re­ports al­most ev­ery­where talk­ing about the Crimea-Ukraine con­flicts, and the war in Don­bass. The Rus­sian in­volve­ment in one side and the Amer­i­can-EU’s in the other.

Yet, we saw Rus­sia re­mained (and is still one of) the Europe’s most im­por­tant nat­u­ral gas sup­pli­ers de­spite recriminations be­tween Rus­sia and Europe. In other words, Europe’s en­ergy se­cu­rity was not rocked, and the oil mar­ket re­mained nor­mal, be­tween $85.00 in Jan­uary 2014 and $93.00 un­til June 2014.

Let’s take an­other good ex­am­ple. The in­ter­na­tional com­mu­nity woke up with hor­ror and shock when the IS seized con­trol of Iraqi city of Mo­sul in June 10th which fol­lowed by tak­ing over many other ter­ri­to­ries in Iraq and Syria. At that mo­ment, the price of oil had scarcely in­creased from $93.60 to reach $97.67 in June 23rd be­fore it sank to be­low $45.00 later on, ac­cord­ing to the WTI data­base ar­chive.

Fi­nally, when Saudi Ara­bia launched mil­i­tary ' Packets Storm' op­er­a­tions against Houthis in Ye­men last month, the oil price had barely in­creased to reach $59.00 from $48.00 tak­ing a pe­riod of one en­tire month.

Thus, it can be ar­gued that po­lit­i­cal un­rest, mil­i­tary mo­bi­liza­tion, and civil wars did not cut the chain of oil sup­ply to the mar­ket, even the oil price did not rocket. That means the “re­gional in­sta­bil­ity” the­ory had mar­ginal im­pli­ca­tions visà-vis se­cu­rity of sup­ply.

To con­clude, the three sig­nif­i­cant in­ci­dents men­tioned above were sup­posed to cre­ate a panic in the oil mar­ket and up­surge the oil price to a new higher record even for a short pe­riod due to oil sup­ply cuts from Rus­sia and the Mid­dle East, but that did not hap­pen. Rather, it sug­gests po­ten­tial di­vorce be­tween re­gional in­sta­bil­ity and se­cu­rity of sup­ply in the fu­ture, i.e. no mat­ter how in­se­cure an oil pro­duc­ing re­gion will be, the oil sup­ply from that zone might con­tinue as usual.

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