“POLITICAL FACTOR IS THE TOP ELEMENT THAT AFFECTS THE PRICE OF OIL”

“POLITICAL FACTOR IS THE TOP ELEMENT THAT AFFECTS THE PRICE OF OIL”

Oil price volatility has always been there since the birth of the oil industry; though economic factors, natural disasters and other elements influence oil prices, the most crucial element that affects global oil price is political factors, said Dr. Anas F. Alhajji, a highly respected energy economist. He was delivering a talk on “oil and politics” organized by the Office of International Cooperation at the College of Economics and Political Science seminar hall on 6 February 2019.

Dr. Alhajji said that international oil market is not competitive and it needs to be managed. “Stability in price is achieved when a nation (such as the US) or an organization (such as OPEC), is managing the international market. High instability results when no one is managing the oil market. On analyzing the history of the oil market, once could understand that when monopoly in the oil market is ended for some time, a new monopoly emerges and start controlling the market and the international oil price”, he said.

In his talk, Alhajji outlined the most important periods in the history of international oil market from 1972 to the present. The factors that influenced oil prices over the years include the 1973 Oil Embargo, the 1979 Iranian Revolution, the Iran-Iraq War (1980-1988), Occupation of Kuwait in 1990 and the Asian financial crisis that gripped much of East Asia beginning in July 1997.

The latest factors that influenced the oil market in recent years is the Shale revolution that started in 2010 and the Arab Spring and sanction on Iran. The “Shale Revolution”, a combination of hydraulic fracturing and horizontal drilling has enabled the United States to significantly increase its production of oil and natural gas, particularly from tight oil formations, which now account for 36% of total U.S. crude oil production.

However, Alhajji articulated the view that the crude extracted from shale rock is generally far lighter than conventional oil and is not the type demanded by the world’s oil refiners as demand for heavier products like diesel increases and demand for gasoline decreases. “Once crude quality starts to limit the growth of US shale production, due to lack of demand from refiners, we will end up with lower oil supply and higher oil consumption”.

Dr. Anas F. Alhajji, is also a researcher, writer and a speaker with more than 900 papers, articles and columns to his credit. He focuses on oil and gas market outlook, energy geopolitics, energy security, and the impact of disruptive technologies on the supply and demand of energy.

Source : squ.edu.om