Oil prices rose sharply in trading amid concerns that fighting between Saudi Arabia and Yemen could disrupt global oil supplies. Wednesday, Saudi Arabia announced it would participate in airstrikes in coordination with other countries against Houthi rebels, a group which is taking over the country with support from Iran. However, with oil having recovered 10% of its price since its recent low due to increased demand, traders have begun to pay attention to the effect of geopolitical instability on oil supply. “The importance of this is perhaps that the market has begun to react to geopolitical supply risks once again, a trend that has been absent in recent months,” analysts at Energy Aspects noted. Traders are particularly worried about Yemen’s proximity to the Bab el-Mandeb Straits, a vital shortcut to the Suez Canal- if tankers were unable to pass through this straight, they would have to go around Africa, which would increase cost.
http://www.nytimes.com/2015/03/27/business/energy-environment/oil-prices-jump-as-saudi-and-yemen-fighting-escalates.html?_r=0
5 Comments
This is a great example of how a country’s economy can be vulnerable to political factors. With oil being the major export of Saudi Arabia, I wonder how the change in oil prices will affect its currency and the economies of other large oil producing countries.
It will be interesting to see the trajectory that oil prices take this year, with the continued unrest in in the Middle East and, on the other hand, the oil boom the US is experiencing.
This is a good example of what Professor Kahn would call the military cost of using natural resources. My question whether this regional crisis would be significant enough to budge up the global oil prices. As we discussed, the U.S. already has an ample supply of domestic oil. Moreover, the current decline in oil prices is primarily (while, mind you, some may disagree with me) due to China demanding much less oil than it did in the past. Considering all these factors, what would be the magnitude of change in general oil prices due to the African conflict?
This is a good example of what Professor Kahn would call the military cost of using natural resources. My question whether this regional crisis would be significant enough to budge up the global oil prices. As we discussed, the U.S. already has an ample supply of domestic oil. Moreover, the current decline in oil prices is primarily (while, mind you, some may disagree with me) due to China demanding much less oil than it did in the past. Considering all these factors, what would be the magnitude of change in general oil prices due to the African conflict?
LOOK AT A MAP. Where is Yemen relative to the Saudi oil fields? The Straits of Hormuz? Incompetent reporting, ignorant readership. While readers aren’t paid to be knowledgeable, reporters are.
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