25 Feb '12, 4pm
Drumbeat: February 25, 2012
Yesterday, Brent was a scary $123 a barrel and WTI more than $108. Yet oil prices were just as high this time last year, on the back of demand from the developing economies and the Arab Spring. Since then, growth has slowed in China while Libya has started pumping oil again. Provided the Israelis don’t bomb Iran’s nuclear facilities, a slowing global economy in 2012 should bring down oil prices. However, there’s an alternative view. The dip in petroleum prices in the latter half of 2011 may be the aberration, not the current rise. Last June Saudi Arabia started pumping more oil because it is desperate for extra revenue to head off internal unrest. In August, the International Energy Agency (IEA), the West’s oil guardian, released petroleum from its emergency stockpile in a bid to deflate prices. These moves were one-offs and difficult to repeat. Yet oil is still going up.