Oxford Brookes Business School

Good Money after Bad?

Thursday, 26 September 2019

Good money after bad

Dr Lawrence Haar, Senior Lecturer in Finance and Petroleum Market expert has recently appeared in Regulation, the journal of the CATO Institute in Washing, D.C. on the very timely topic of energy security.

Dr Lawrence Haar writes:

Although closing the straits of Hormuz through which about 20% of the world’s crude oil flows would not be welcome, the fact that the latest attacks and their possible repercussions have only pushed up the spot price of oil by less than $10 while prices on the forward curve have moved hardly at all. Together these facts attest to the fundamental resilience of global oil markets.

Although concerns over “energy security” as defined by the International Energy Agency might keep some policy makers awake pondering extreme scenarios, oil market participants industry and traders alike know that as during the “Arab Spring” or the Gulf War, the flexibility in global supply chains and the scope for managing risk, mean that there may be less to worry about than popularly imagined. Could an extreme scenario be enough to push the world into a long-term economic correction as widely feared? Reduced energy intensity to GDP ratios mean that Europe and America have less to fear. The nation with probably the most to worry about from higher oil prices would be those dependent upon manufacturing, such as China.

Click here to read the full article >>