Author: Agustino Fontevecchia
This article is about the soon rally in crude oil prices and the reasons behind the rally. The article states that the markets have underestimated global demand. Another reason for the spike in oil prices is the weak U.S. dollar. Barclays predicts that a barrel of oil can rise up to $118. The article states that West Texas Intermediate contracts for March delivery is trading at $119.39. Brent oil rose to a three-week high of 91.70 Euros. The demand for oil has also increased because Asian demand will increase .98 million barrels of oil a day up to 29.33 million barrels a day. The Asian markets are 92% of the increase in demand for oil. The supply of oil is also jeopardized because of conflicts with Iran. The current market prices reflect a significant risk premium for the potential of a supply disruption from a geopolitical event. The article states how the quick increase in demand and an unstable geopolitical system could create inflated oil prices.
I believe that if the U.S. uses military force against Iran then oil prices will spike. Therefore the race for president in 2012 is critical. Some of the republican candidates have aggressive foreign policies and are looking to take military action against Iran. Rick Santorum is one of the candidates with an aggressive foreign policy. He is one of the republican front runners for president and I believe if he wins presidency then the crude oil futures will see an increase in volatility. This is an important issue because volatile oil prices can be detrimental to business and effect major necessities such as food. Oil is a crucial commodity because it affects all other commodities. The only solution to this problem is to manage oil demand and work with the U.N. to create a delicate foreign policy that Iran can agree with and therefore not cut off oil supply.