Where to for oil prices?
Linda says:
Relief appears to be around the corner for oil prices, hopefully for oil dependent countries and poor motorists.The words “demand destruction” are being used to describe the phenomenon. The rationale for the fall appears to be that multiple countries are heading towards some form of economic slowdown with signs of trouble involving now Europe and Japan. And thus the private and commercial use of oil is falling.
In its normal cycle, demand will not start rising until the colder months of the Northern hemisphere. Apart from demand, prices are heavily impacted by changes in production and various types of geopolitical instability. Iran remains an uncertainty, Iraq is improved but not stable, and strife has impacted Georgia.
Georgia is home to current pipelines supplying Europe and the future home of several proposed pipelines. Russia’s government and it military are heavily funded by oil revenues. And, not surprisingly its military are now in parts of Georgia, reasserting Russia’s traditional influence in the area.
Whilst there are other issues such as missiles, and proposed NATO membership for Georgia involved in the conflict, the aim of many of the pipeline projects is to supply Europe with alternate energy sources to those under Russian control. Countries such as Russia and Iran are not favorably disposed to a fall in prices, and can be expected to try to influence the price back up.
While the economic situation would appear to favor a price fall, military actions or threats may be designed to counter this trend.
