Energy expert, Dr Yussif Sulemana, has revealed that the hikes in brent crude to $88 per barrel due to the Israeli-Hamas conflict is merely speculative.
According to him, the increase in brent crude prices may not adversely impact pricing locally. He indicated that the conflict however does create huge problem with potential dire ramifications.
Dr Sulemana explained that if one looks at the global energy community, energy actually flows from the East to the West.
As such, he noted that even though the conflict is “remote and just within Palestine region”, there could be escalation because there are so many competing interests that are involved”.
“This jump is actually speculative; the only thing is that we are just praying cool heads will actually prevail because there’ll not be a winner in this kind of conflict. If it actually prevails and oil stays in the upper 80’s I won’t expect any significant increment at the pump…Dr Yussif Sulemana
Dr Sulemana expressed that if the war persists and there are more speculations with regards to the hikes in prices, marketers will only increase fuel pricing due to the uncertainty.
He elaborated that they will always put some kind of “risk premium” on the product because they don’t know what will happen, and the consumer will always bear the brunt of that.
“So, yes, as much as I don’t see any substantial impact, any prolongation of this kind of conflict, yes, the impact at the pump will be dire, especially if the oil goes back to the 90’s. Remember it actually dropped below the 90’s and in fact, below the mid 80’s but just for this conflict that erupted over the weekend, we saw a quantum leap up and almost flirted around the 90’s.
“So, yes, it’s not a certainty, but what we expect is that if it still stays around the upper 80’s, I will not expect any quantum leap with price at the pump. But if it persists, yes, the consequences could be dire, and we could have our pump prices going up…”Dr Yussif Sulemana
Impact of Israeli-Palestine conflict on brent crude
Commenting on whether the jump in prices of brent crude triggered by the Israeli-Palestine conflict will create problems, Dr Sulemana revealed that Israel on one hand, has a lot of competing interests and supporters, as Palestine does.
However, he expressed that the epicenter of this is the hub of Middle East, and Middle East is the hub of global oil production and as long as fossil fuel continues to be the energy of choice and contributes closer to 80% of global energy security, there’s bound to be some problems.
Owing to this, he highlighted that any impact on the supply chain of the commodity will have dire consequences.
“There’s historical precedent of this particular conflict. If you notice in the 1970’s market crash, one of the major issues that catalyzed the crash of the market was the oil embargo and it was because of also Israel and Arab world.
“Though this is Israel and Hamas, but Israel and Arab world, what the Arabians did, because they were the seat for OPEC, they came together and quickly put oil embargo. We don’t expect that to happen because dynamics have changed, but let’s say miscalculations could be there.”Dr Yussif Sulemana
Furthermore, Dr Sulemana emphasized that oil market watchers who are conversant with the 1970’s market crash will only be sitting on tenterhooks. This, he explained, is because if there’s any miscalculation on each of the party’s side and it actually escalates into another conflict and there’s a “cut in supply to the global basket – either inadvertently or planned like what happened in the 1970’s, undoubtedly there’ll be market crash”.
“What will happen is that with huge supply drop, there’s going to be shortage and what’s happening is just an example. What’s happening is just a speculative jump, it’s not actually the fundamentals that are kicking in, but if this war prolongs, the fundamentals will actually kick in. Once the supply is dwindled or restricted, the ramifications are dire. We will have supply shortage and you can imagine where oil prices will be.”Dr Yussif Sulemana