Inside Financial Markets

Will the Syria conflict cause a spike in oil prices?

oilWill the Syria conflict cause a spike in oil prices?

Watching the price of oil rise and fall on speculation about foreign military intervention in Syria, some industry experts are warning drivers they may see an effect at the pumps.

The price for a barrel of oil retreated Thursday, after hitting a two-year high on Wednesday.

Many speculated the price had come down based on U.S. President Barack Obama’s comments that he had not yet made a decision on a military strike in Syria. Dan McTeague, a oil price analyst and former Liberal MP, told CTV’s Canada AM that prices in the country will edge down if the situation in Syria begins to “climb down,” but if there’s a strike in Syria, “then all bets are off and the prices will begin to rise.”

He added that because parts of Canada continue to import oil, the country is susceptible to conflicts around the world.

“We don’t have enough to meet our own needs,” McTeague said Thursday. “As a result, we are vulnerable. We are exposed to whatever variations are going on around the world.”

He added that in eastern Canada there is a lack of competition at the refinery level, meaning that “whatever disruptions happen around the world, or even internally domestically, Canadians pay for them in a nanosecond.”

Syria is not a major oil producer, but if the conflict spreads across the region, it could lead to a supply disruption in the Middle East.

“If there is a drop in the supply, we could see a rise of $1.50 to $1.70. At the pump, this would be a 25-per-cent increase,” said Jean-Thomas Bernard, an economics professor at the University of Ottawa.

The Middle East produces approximately one-third of the world’s oil.

“I think the market is overreacting to this right now, we see this as something that will be limited in scope and duration,” said Greg Priddy, a director at Eurasia Group’s Global Energy and Natural Resources.

Past conflicts in the Middle East that led to higher oil prices, including the invasion of Iraq in 2003, took place in countries that were larger producers of oil.

Priddy also expects the impact of the Syrian conflict on oil prices will be short-lived.

And energy analyst Michael Ervin thinks the impact will be “nil.”

“For one thing, Syria is not a significant producer of crude oil at all and secondly, from a geopolitical view, the Arab League is pretty well behind any western efforts to reduce the tensions in Syria,” said Ervin.

If consumers do see a rise in prices at the oil pumps, there are other factors to consider: the political unrest in Egypt, the rising civil unrest in Iraq and Libya. These countries play a bigger role in contributing barrels of oil to North America.

With a report by CTV’s John Vennavally-Rao

Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)