<
--------------
STRATFOR.com
--------------
THE INTERNET SOURCE FOR GLOBAL INTELLIGENCE
If it’s in the news, it’s too late...
Oil Embargo Threats Carry More Weight
April 5, 2002
Summary
The threat of an oil embargo against the West, particularly the United States, has
more weight in light of the current violence in the Palestinian territories. However, an
embargo seems unlikely for a number of reasons. Any targeted state would be able
to procure replacement oil from a number of sources. Furthermore, those that would
be hit hardest by an embargo include countries in Asia that are sympathetic to the
Palestinian cause and are still struggling with the effects of Asia's own regional
Image Credit: Stratfor.com.
Analysis
Stripped of the Middle East's political complications, the underlying energy market is broadly stable. That does not mean oil prices are likely to drop back into the $15-per-barrel range. The escalation of the Israeli-Palestinian crisis has nurtured a climate in which spurious threats can develop quite long legs. Recent threats of embargos against the United States may not hold any more weight than they did last year, but against a bloodier backdrop, they carry more significance.
1973: The year the lights went out.
Image Credit: The BBC.
Oil prices have moved up from lows of $16.60 a barrel in November 2001 to a high of $27 a barrel on April 5. Yet despite this recent price rise, the oil market's underlying fundamentals are largely stable. Typically spring is the season of weakest demand, but a rapidly recovering American economy is helping pick up the slack. Furthermore, the increase in U.S. military demand for oil is helping prices spike.
Iranians burn an Israeli flag during a pro-Palestinian demonstration in Tehran Friday.
Image Credit: Behrouz Mehn -- AFP.
There are only two systemic factors that might upset this equilibrium before 2003. First, Angola and Russia are both dramatically expanding their production capabilities. By year's end the two countries will likely be pumping another 500,000 bpd collectively. Second, the lack of investment in the oil sector by Venezuelan President Hugo Chavez has gutted that country's long-term ability to function as a major oil supplier. Venezuela may also face a short-term problem, with oil workers from the state-owned Petroleos de Venezuela (PDVSA) threatening a strike that could shut down production temporarily.
(The Rest of the Story)
(c) 2001 Stratfor, Inc.
Related Stories:
* Iran joins call for oil embargo
The Associated Press
Friday, April 5, 2002
* Analysis: Another oil embargo?
James Arnold -- BBC News Online
Friday, April 5, 2002
* Iran calls for oil embargo on West
David Blair -- Telegraph Group Limited
Saturday, April 6, 2002
* Iran threatens embargo against Israeli allies
Ali Akbar Darieni -- The Associated Press
Saturday, April 6, 2002
Dan
Oil Embargo Threats Carry More Weight . . .