The complexities of the oil market leave many scratching their heads when prices at the pump begin to climb to familiar levels — levels that mirror those of the recession. While the unrest in the Middle East can influence oil prices, seemingly countless factors play a role in the global oil market.
The revolts, revolutions and wars in the Middle East have constricted the oil supply for many European countries that depend on oil from Arab nations. Major oil producing countries bordering the turmoil, like Saudi Arabia, are becoming more worried over fears that unrest could come knocking at their doorstep. But in Japan, natural disasters have slowed the country's oil consumption, decreasing demand and lowering price.
Cost is based on more than a simple supply and demand graph. Although some may blame political unrest for climbing oil prices, other economic forces are also at play. Even geography and climate can influence prices, as some nations, such as Russia, can't shut off oil valves because of the freezing conditions. The smallest details complicate the equation.
Nations hungry for gasoline demand more, setting the ever-seesawing global oil market in constant limbo.
Highlights from this week's guests:
San Diego: Eric Watkins; oil diplomacy editor; Oil& Gas Journal
"The period of time I spent in Saudi Arabia it was a remarkable time, back in the early '80s. Oil was beginning to make itself felt, at least oil revenue in the country. I remember watching roads being constructed in 24 hours. It was like they were coming in and spray painting roads and buildings. By contrast, Yemen is a very small producer… You didn't see much in the way of economic benefit for people in general. That's been going on for years."
Moscow: Andrew Kramer, New York Times correspondent
"Russia is the biggest winner in this situation. It's a free rider on OPEC, so it never has to cut back its own production to benefit from prices in the middle of uncertainty. Right now, in the Middle East, a great financial windfall … Russia looks now comparatively more stable as an investment destination for oil companies. If they come in and invest in new fields, new pipelines, liquefied natural gas plants, etc., a few years from now, Russia could potentially become a larger producer and marginally supplant much of the supply from the Middle East."
New York: Mark Shenk, Bloomberg News
"Oil is a fungible market. Libya produces some very high-quality oil, which mostly goes to Europe. The Europeans are going to have to get oil from somewhere else to replace it. Some of those barrels that may have come to the U.S. from mostly West Africa will probably be diverted to Europe."
Dubai, UAE: Adam Schreck, The Associated Press
"In the Middle East, we've got a lot of different conflicts going on right now. Libya, Yemen and now Syria so things are really heating up. While Bahrain is not a major oil producer, it's very close to Saudi Arabia, at least in proximity to the major oil market…What you are seeing in (Bahrain) is continued low-level unrest that has Saudi Arabia, which as the region's major oil producer, is very concerned. Saudi Arabia sees what's happening in Bahrain as something it does not want to see spread to its shores. Bahrain is only a causeway away from Saudi Arabia."