January 3, 2005
With Geopolitics, Cheap Oil Recedes Into Past
By JAD MOUAWAD
IT was a year that people in the oil markets are unlikely to forget - a year that prices set records, forecasts lost touch with reality, and almost everything that could go wrong, did. It was also a year that politics returned to the oil market.
And the trend is likely to continue this year. While oil prices have declined since October, many of the issues that have vexed the oil industry in 2004 are expected to recur. Cheap oil increasingly looks like a thing of the past.
Through the 1990's, prices were stable, supplies were secure and there was plenty of extra capacity to keep energy costs low and world growth buzzing. At an average of $20 a barrel, oil was viewed as just another commodity.
But then came ethnic and labor troubles in Nigeria; chaos and protests in Venezuela before President Hugo Chávez won a referendum allowing him to stay in power; hardball energy politics in Russia; and the continuing insurgency in Iraq.
While supplies of oil to the world markets were rarely interrupted, the uncertainties created by these events raised crude oil prices in New York by two-thirds this year, to a high of more than $55 a barrel in October...."Oil is a political commodity," said Robert Mabro, president of the Oxford Institute for Energy Studies, one of the world's foremost energy experts. "Geopolitics is the most fundamental issue if you're looking at oil markets. People seem to have forgotten that since the 1980's."...
http://www.nytimes.com/2005/01/03/business/03oil.html?8hpib=&pagewanted=print&position=
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