Oil prices continued to rise Wednesday amid growing certainty U.S.-led forces will take military action against Syria. NBC News, quoting an unnamed senior U.S. official, reports strikes against Syria are expected “within days” as the Obama Administration is “past the point of [no] return.”
In reaction, West Texas Crude traded just below $110 per barrel intraday Wednesday, its highest level since May 2011. Meanwhile, the global benchmark Brent crude hit a six-month high above $117 per barrel.
As has been widely reported, the main concern is that any attack on Syria – which is not a major oil producer – will lead to a wider regional conflict. Mike Wittner, global head of oil research at Societe Generale, says such an outcome could drive Brent crude prices as high as $150 per barrel in the near term.
“Our big worry is Iraq. The Sunni vs. Shiite conflict in Syria has a direct parallel in Iraq, and the violence in Iraq has reached levels not seen since 2008,” Wittner writes. “Iran, who is Syria’s only state ally in the region (Hezbollah and Russia are Syria’s other allies), may choose to stir up…attacks [on oil production and transport facilities] in order to hurt the economies of the Western countries by causing an oil price spike.”
In addition, there are concerns that Syria or its allies might attack Israel in an effort to draw the Jewish state into the conflict, which would further complicate the Obama administration’s already delicate diplomatic position.
Regardless of how this all plays out, the reality is that higher oil prices – if sustained – will put a drag on the already tenuous U.S. economic recovery, as well as economies in Europe, Japan and China.
And regardless of the near-term course of events, this latest surge in oil prices is a reminder that no matter how much newfangled technologies change our lives, or how much progress the U.S. makes toward energy independence, the global economy still runs on fossil fuels which primarily come from the world’s most volatile region.