Its MENA once again; serving as a slippery road, the region’s civil unrests, political tensions and pipeline threats are painstakingly becoming a tradition in battering the oil market.
Recently, the fluctuation in oil prices has brewed in response to the ongoing violence in Syria where the government is suspected of chemical weapon attack that killed over 300 civilians earlier last month.
The threat of action against the country and hence any supply disruptions pushed up Brent crude oil prices as high as $116 per barrel in August 2013. Here, it is imperative to note that the Syria might not be a major oil producer, but the spreading of the conflict could adversely impact supply routes and production of major oil producers in the region.
Meanwhile, the neighborhood has also been on the fritz; production in Nigeria has been hit by technical problems and oil thefts, whereas Libya has reported the lowest crude oil production and export volumes since its civil war in 2011.
Although the crude prices eased down very recently, unrest in the region, which is far from over, will continue to stoke investor fears. And rightly so; various international investment banks consider even a sustained increase in oil prices a drag on global growth.
Another red flag for international oil prices raised by Organization of the Petroleum Exporting Countries (OPEC) in its latest oil market report is the increased disruption in the oil market primarily in the Middle East region.
So, when the oil prices are expected to remain elevated; how they would affect the macroeconomics of Pakistan is anybody’s guess. Apart from being a boon for the upstream oil and gas companies, an increase in the international crude oil prices has a very high tendency to weaken the country’s fiscal position and external account.