Combined geopolitical risks show US oil boom is real
Malaysia Flight 17 was shot down right at the border of Ukraine and Russia, right at the flash point of hostilities, right where Russian separatists are operating and controlling the region. Amongst the people aboard were three Australian siblings, ages 12, 10 and 8, returning home with their grandfather from a vacation in addition to 80 other children the United Nations said were in the flight.
Both Russia and Ukraine are blaming each other, but Ukraine’s state security service said that it intercepted phone records from pro-Russian militants discussing the missile strike that knocked the Boeing 777 out of the sky. One way or the other, Russia has a hand in the shooting here.
The United States has begun building a circumstantial case against Russia for the downing of a Malaysian airliner. President Obama said Russian supplies of sophisticated weapons to Ukrainian separatists were “not an accident” confirming widespread reports of preliminary US conclusions. Obama stopped short of publicly accusing the separatists, or their Russian patrons, of pulling the trigger. But he left little doubt who he believed was to blame for what he called “an outrage of unspeakable proportions.”
German Chancellor Angela Merkel pressed Russia to work harder toward a political solution in Ukraine. But she also drew a line between the Russians and the separatists, saying that “the Russian president of course has an influence,” but “still one has to differentiate between the separatists and the Russian government.”
Russia said it welcomed an investigation by the United Nations’ International Civil Aviation Organization but responded sharply to the thinly veiled U.S. accusations of at least indirect responsibility for the shoot-down.
At an emergency UN Security Council meeting in New York, Samantha Power, US Ambassador to United Nations said a Russian-made SA-11 missile system, easily capable of reaching the plane that was flying at 33,000 feet, had been spotted in the area of the shoot-down adding that “it is impossible to rule out Russian technical assistance” to separatists operating it.
There have been many conjectures about fatal act. Many questions, and their economic implications, remain unanswered. The flight that was downed was from Malaysia, an Islamic island nation not really on anyone’s support list right now but the dust has not yet settled on the botched airline mishap, the still unrecovered MH 370.
Uncertainty may linger
Oil prices jumped on news that a Malaysia Airlines passenger plane went down in eastern Ukraine, as traders worried the crash could become a potential flash point that presented another threat to global crude supplies. Some traders said they were inundated with buy orders as news of the plane crash—and speculation about the cause—rippled through financial markets. Russia pumps more than a tenth of the world’s crude and its standoff with the West over Ukraine has raised concerns among traders that the tensions could lead to an interruption in those supplies.
The geopolitics were tense before the crash happened; a day earlier US imposed tougher sanctions against four major Russian business entities including Rosneft, its largest oil company. The aggressive sanctions were designed to hit President Putin’s inner circle harder for supporting pro-Russian separatists in Ukraine.
The victims include Russian banks and energy and military firms, but Gazprom was spared. US officials say that Putin and Russia have a “clear choice to make between increased costs and sanctions pressure, or de-escalating,” their interference in Ukraine.
European governments have generally been more reluctant than the Americans to slap tougher sanctions on the Russians largely because of Moscow’s energy clout in the region. Some analysts suggested that the desire of Europeans to sidestep truly forceful sanctions to protect their economies should not be underestimated.
US oil boom is real
With all the geopolitical risks around the world; the Russian-Ukraine fiasco, fighting in the Gaza strip intensified after a shaky cease-fire expired, yet another source of turmoil in the Middle East, the world’s most important oil-producing region, Islamists insurgence in Iraq; crude prices on the international market witnessed some spikes but gasoline prices for US motorists stayed pretty much flat. The price at the pump has even fallen further even after Malaysia Airlines Flight MH17 exploded over Ukraine and Israel sent ground forces into Gaza. And while the per-barrel price of domestic crude oil ticked upward following the bad news, it’s still slightly cheaper than it was a month ago.
It is a clear sign that US energy boom, which has turned the county into one of the world’s largest oil producers and the biggest producer of natural gas is real.
Besides the latest turmoil in Ukraine, Israel, Iraq and Syria, prices have also stayed steady in US even as oil is taken off the global market because of a combination of unrest in Libya and oil theft in Nigeria and sanctions against Iranian oil exports. That may have been unthinkable just a few years ago, experts say.
The daily losses in the global oil supply tied to Iran, Libya and Nigeria have been almost perfectly offset by the rise in US oil production.
FRANK UZUEGBUNAM