Commodity Daily News

Geopolitical Environment to Keep Crude Oil Prices High

What a year for geopolitical instability. Who could have predicted the number of political and social revolutions spreading across the Middle East and Africa? Does this prove the Bush doctrine was influential in its attempt to establish a democracy in the heart of the Arab world?

Despite the volatility, spot crude oil prices look to end the year only $10 higher from their 2010 close which can be attributed to two factors; increased US/Iranian tensions and improved US economic data. The recent banter between Iranian leaders and the US 5th fleet over the Iranian threat to close the Strait of Hormuz is a notable escalation in the two countries' relations. The US Department of Energy considers the Strait of Hormuz as, “The world's most important oil chokepoint,” the escalation of tensions may only have begun to be priced in by investors. Additionally, the trend of stronger US data releases has not gone unnoticed. Should the positive momentum in the US economy from H2 carry over into 2012, crude oil prices may have the potential to rise further without significantly weighing on the economic recovery.