World oil prices are again acting up on geopolitical tensions and the Venezuelan political and economic crises that have trimmed crude production in the South American nation.
Nobody would have thought that oil prices in the world market would rally in just a short span of time. Brent crude in January 2016 sank to as low as $27.67 a barrel while the US benchmark crude plunged to $28.36 because of oversupply and the weak state of the global economy.
Much has happened since then. Oil prices steadily made a comeback as the US economy recovered and China steadied itself to avoid a downturn. Oil-producing countries, both members, and non-members of the Organization of Petroleum Exporting Countries agreed to reduce their output to shore up prices in the world market.
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Latest world developments, meanwhile, have added uncertainty in the crude market, pushing up oil prices sharply in the last few weeks. The Department of Energy noted that world oil prices, using the Dubai benchmark, had risen nearly 20 percent since January this year and topped $80 per barrel in intraday trading last week for the first time since 2014.
The International Energy Agency fears that US President Donald Trump’s decision to pull the US out of the 2015 Iran nuclear deal may hurt oil output in the Middle East nation. Adding to the supply woes is the turmoil in Venezuela, which has reduced oil production.
The two geopolitical tensions have prompted the chief executive of French oil giant Total to say that he “wouldn’t be surprised to see $100 per barrel” in the coming months. One Philippine energy official agreed. Oil Industry Management Bureau director Rino Abad warned that oil prices might continue to go up in the short term or up to six months if the current global situation persists.
World oil prices quickly react to the vagaries of the market and geopolitics. Economic managers, thus, cannot belittle the oil market even if prices appear to be softening as they did two years ago. Oil prices will remain volatile and a critical economic indicator, especially on a heavy oil importer such as the Philippines.