Tensions in Middle East affecting oil prices

Adriene Hill Feb 15, 2012

Adriene Hill: We have reports this morning that an explosion hit an oil pipeline in Syria. Political tensions have also threatened the oil industry in Sudan, Yemen and Iran.

For more we go now to Mehdi Varzi. He’s director of an energy consulting firm in London. Good morning, Mr. Varzi.

Mehdi Varzi: Good morning.

Hill: So how significant is the news out of Syria today in this bump we’re seeing in oil prices?

Varzi: Well, I think the whole thing is that Syria is a very small oil producer. And the global oil market, in terms of what it has in surplus production capacity, is very tight. In terms of any potential shortfall, there is not that much extra surplus capacity to bring onto the market. And that is what is, I believe, partly boosting oil prices. Any event elsewhere, whether it is in Syria, in Yemen, or in Nigeria, will tend to have an underpinning effect, as it were, behind oil prices.

Hill: Now what other concerns are driving the market up today?

Varzi: The key concern, quite frankly, it’s a bigger thing altogether, which is the whole issue around the Persian Gulf, and whether the Strait of Hormuz will be closed. What impact there will be on the market if Israel decides to launch a preemptive strike against Iran. These are much bigger factors than Syria or Yemen or Sudan or elsewhere.

Hill: Mr. Varzi, thanks so much.

Varzi: Thank you.

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