Terror attacks! Explosions! Rumors of war! Yet oil remains unmoved. In a sad commentary on the world we live in the oil market has a built-in price for war terror and destruction. Now don’t get me wrong, contracts in the futures markets always have to have a risk element built into it because to a large extent they are partly insurance contracts to assure, barring an act of God, that you will be able to get delivery of a said amount of oil at a stated price at a certain delivery point. Yet in the past events like we have had over the last few months would normally be the type of events that would shock us and jolt prices. Now we remain largely unmoved because the markets have already to a large extent priced the risk of the sad events that we have seen in part because global supply is not as tight but mainly because the markets expect a certain amount of death and destruction.
A perfect example is the disturbing report of an explosion at the offices of oil company Petroleos Mexicanos in Mexico City where an explosion ripped through the building killing at least 25 people and injuring at least 100 more and sadly the numbers will rise. This comes just after al-Qaeda groups have threatened to carry out attacks on Western targets.
The war against terror in Mali by the French and African troops that led to Al-Qaeda taking over the BP facility in Algeria which led to a short spike in the European gas market and more threats. One that may or may not have been carried out in Mexico. Yet oil is unmoved. Reuters says that “The French or African troops who hunt down the Islamist fighters holed up in the mountains and deserts of northeast Mali may find a resilient enemy capable of fighting back with a concealed arsenal of surprising firepower. France's initial success in its three-week old intervention in its former colony has gained Paris plaudits at home and abroad as a welcome blow struck against radical jihadists threatening Africa and the West.”
The war goes on in Syria with the murderous Assad regime being backed by Iran and Russia leading to an aggressive move by Israel. The New York Times reports that “Tensions over the Israeli airstrike on Syrian territory appeared to increase on Thursday as Syria delivered a letter to the United Nations declaring its right to self-defense and Israel’s action was condemned not only by longstanding enemies, including Iran and Hezbollah, but also by Russia.” And oil remains unmoved.
In Ankara, Turkey overnight an explosion at a U.S. Embassy killed two people in an eerie reminder of the Bengazi, Libya attack. This comes the day after reports that U.S. Embassy in Afghanistan is being targeted. Yet oil remains unmoved. In Libya Reuters reports that “As night fell over Benghazi, a familiar sound echoed across the eastern Libyan city — an explosion, and then gunfire. A bomb had just been thrown at a police car on patrol, injuring an officer. It was the latest of many attacks on local security forces. Two months before, the man whose job it was to ensure Benghazi was safe, the police chief, was shot dead outside his home.” Yet oil remains unmoved.
Egypt is in a shambles as the Muslim Brotherhood is losing its grip and thousands are expected to protest for a change in government. The possibility of civil war is rising. And oil is unmoved.
Is it that we have priced it all in? Will we need to see a major disruption for oil to move? Is it the shale gas and oil revolution and the end of the myth of peak oil? Whatever it is, it is sad to see we live in a word where hate, murder and destruction is a daily cost of doing business.