George Kerevan (Business comment, 14 June) suggests that Middle East conflicts will propel oil prices towards $120 per barrel and advises we buy bikes.
Sooner, rather than, later price increases will be passed on to motorists and to consumers in energy bills. Moreover, such are the economics of oil, a high price for crude isn’t all bad news.
It may for instance, encourage more investment in exploration in high cost oil fields such as the North Sea. Also, a high oil price is richly rewarding for low-cost oil producing countries. Which in turn swells enormously the sovereign wealth funds of Middle East emirates with petro dollars.
Significantly, Lukoil, a Russian company, recently began pumping oil from one of Iraq’s largest oilfields. Now, after annexing Crimea, Russia has become one of the major oil producers in global markets. Will this influence Russian power in relations with the United States and the European Union over the Ukraine?
Arguably, perhaps the geopolitics of oil will shift the dependence of America’s allies and trading partners towards Russia for essential supplies of oil and gas.
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