The article Syrian conflict: What it means for the oil markets discusses the possibilities the conflict in Syria will have on the oil markets. The location of Syria, being in the Middle East, plays a key part in what this conflict could do to oil prices. Even the current situation of possible conflict has made the price of oil go up. Syria itself is an oil country, but produces a small amount and doesn't play any real role in the international crude oil trading market. The big problem with the conflict is the fact that Syria is close to a major oil pipeline that could affect global oil trading. The KeyKuk-Ceyhan oil pipeline lies directly north of Syria. This pipeline is one of the main ways Iraq transports their crude oil. This pipeline has the ability to transport up to 1.15 million barrels of oil a day. If any conflict erupts in Syria there is potential that sabotage will occur to the pipeline as retaliation from Syria. Syria also is in close proximity to the Strait of Hormuz. The strait is bordered to the north by Iran. Iran has strong political ties to the Syrian regime. If conflict in Syria reaches a point of action Iran could attempt to block access to the strait. This is important because around 20% of all the oil traded in the world passes through the strait at some point. Conflict in the strait could cause large upward fluctuations of oil in the global market.
With turmoil in the Middle East improvements to domestic oil production could actually occur. United States oil producers would be able to reap the rewards of the inflated oil market. They would be able to sell at the higher price, but would not have to deal with the potential conflicts in the Middle East. Domestic exploration and production companies could use the conflict as a way to expand.
In class we looked at potential outcomes if sanctions would be imposed. We talked about how trade sanctions can reduce welfare. We discussed how some may even gain from sanctions, especially because they rarely reach the level of regimes. If the US takes action against Syria it could be detrimental to the citizens of Syria, the people we would be "trying to help". With the potential of domestic oil companies gaining from conflict in Syria it poses a difficult situation. If the US decides to act on Syria would we only be hurting Syria more and improving our domestic oil companies in the long run. There are many implications on this matter, and many outcomes could come to pass.
I think what you said here was a good idea. But I do think that we need to think about what happens to our trading partners in the Middle East if we decide to start to up our oil production. I think that if we decide to do that then they might take that to mean that we do not want to trade with them fairly. This in turn could lead to them not importing some of the goods that we export to them. If this is to happen this would hurt our terms or trade because we would not be exporting as much as we would have if we did not start to produce more of our own oil.
ReplyDeleteA strike against Syria would definitely impact western countries. According to Reuters, oil price rose to a six-month high as Western powers prepared to strike against Syria. Also, it would create a wider regional conflict. Syria has already have the support of Iran’s president, would only exacerbate the situation in the Middle East for Western countries. Therefore, keeping a close watch on nuclear weapons production in the Middle East would get harder for the U.S, and would get easier for any of the two who really want to produce it. It would increase the price of oil more for any importers and therefore would draw support possibly from Asian countries and Russia. The question of whether or not we would be able to sustain such oil production in long run would be debate, whether we would have to turn to other alternative countries like Brazil and so on. Ultimately, price would definitely go up.
ReplyDeleteSyria must actually be treated as a small country. Because Syria itself produces a small amount and doesn't play any real role in the international crude oil trading market. Consequential Syria´s influence does not have any impact of world prices.
ReplyDeleteBut due to the closeness of the KeyKuk-Ceyhan oil pipeline, which is one of the main ways Iraq transports their crude oil, and with the view of an eventually upcoming obstruction of this pipeline by Iran as a political reaction, the consequences of the Syrian conflict for the oil price are significant.
If the pipeline would be blocked, the world price of oil would increase in general because of the law of supply and demand. In my mind, even when I ignore the ethical and moral aspects, the Syrian conflict and resulting changes in world price of oil would harm every country. So I do not understand why this should improve the U.S domestic oil companies in the long run.
I agree with Caroline that Syria must be treated as a small country when dealing with oil. Though they are a major player in how it can be supplied. They have the access to severely disrupt trade with the KeyKuk-Ceyhen pipeline. Though I do believe that if the US was to intervene we would probably secure the Oil lines first as we have seen in every major gulf operation the US has been involved in. This being said I do foresee some changes in oil prices as investors get nervous during the early stages of intervention, though if the US acts accordingly to its history then prices should drop with security.
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