As Syria Turmoil Escalates, Where’s Worry of $200 Oil?
The Wall Street Journal reports the Obama administration has hardened its stance against Syria and stepped up plans for possible military action, after allegations the Assad regime used chemical weapons. All politics and alleged atrocities aside, when it comes to the financial stories that arise from turmoil in this region, they typically boil down to one major theme: oil.
Related: Oil Tops $100 Again, Here’s the 1 Thing Energy Investors Need to Watch
For example, a simple Internet search for “$200 barrel oil” brings up links to concerns of oil reaching that point if there was an Israeli attack on Iran and another suggesting that traders were betting crude would be headed there if protests in the Middle East and North Africa spread. These reports have one thing in common: they are old news (from 2012 and 2011 respectively).
Contrast that to this morning -- the headline for crude was that oil was down after a disappointing durable-goods report, after rising to around $107 amid the prospect of Western military intervention in Syria. In other words, no terrifying oil movements or corresponding predictions for how much worse it could get. (Yes, we know Syria isn’t a major oil producer, but it’s important for oil transport and by virtue of its location, turmoil can affect speculation. And Syria isn't alone in the region when it comes to conflict.)
In a New York Times Op-Ed, Thomas Friedman asks readers to imagine that five years ago someone had said: “In 2013, Egypt, Libya, Syria, Tunisia, Yemen and Iraq will all be in varying states of political turmoil or outright civil war; what do you think the price of crude will be? You’d surely have answered, at least $200 a barrel.”
Friedman argues the price of oil is half that because the U.S. uses 60% less energy per unit of G.D.P. than it did in 1973. Meanwhile, in 2006 the U.S. depended on foreign oil for 60 percent of consumption versus 36% nowadays.
Imports have fallen dramatically as U.S. oil production has reached its highest level in two decades.
Related: Natural Gas Boom Could Make U.S. Energy Self-Sufficient: BBVA's Karp
So he argues, when it comes to U.S. policy towards the Middle East, oil doesn’t matter quite as much. Yes, it’s still a global commodity that can impact the U.S. as a result, but Friedman quotes an energy economist saying “the urgency is gone,” and that “the Middle East is China’s problem.”
Related: U.S. Oil Production to Shock Global Energy Markets: IEA Report
And as China battles the U.S. for title of “world’s biggest oil importer,” a new report says the price tag for China’s oil imports will double to nearly $500 billion by 2020. The report also indicates China has become more dependent on OPEC oil.
So what does this mean for China’s economy? What does it mean for the U.S.? And what impact is Syria having on oil? Check out the video above too see what Mike Santoli, senior columnist for Yahoo! Finance, thinks...
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