Oil prices rose during January, with increases fueled by the stand-off between Iran and the west.
Both sides have exchanged heated rhetoric in the last few weeks. The European Union has placed an embargo on all Iranian oil imports, while Iran has threatened to shut the Strait of Hormuz, a crucial waterway for Gulf oil exports.
One Kuwaiti oil executive has now predicted the cost of oil could soar to $160 a barrel if the tension continues, or if conflict results from the threats. The U.S. has already stated it would take military action if Iran closed the Strait of Hormuz. Kuwait Petroleum Corporation board member Ali al-Hajeri told Al-Seyassah Daily:
“If the embargo on Iranian oil persists, or in case of a military move over the closure of the Strait of Hormuz, oil prices are expected to soar to around $150 to $160.”
The current price rose in January to between $100-105, a level al-Hajeri calls “fair and acceptable.” The market remains nervous, however, and while a cold snap in Europe and the weak European economy could keep prices down, this could be offset by western and Iranian threats. There’s also a chance that European stocks of coal and gas could be depleted by the unusually cold weather this year, pushing oil prices up.
John Heffernan, power trader at Bord Gáis Energy remarked:
“The upwards pressure on oil prices in January was largely driven by market uncertainty regarding the implications of EU sanctions on Iran and the very tentative improvement in sentiment surrounding several major economies.”
The Bord Gáis Energy Index has increased 8 per cent over the past year, with oil pushing the figure up dramatically.