Energy and geopolitics

In this interview with Cyba Audi from Asharq Business Bloomberg, Dr Carole Nakhle, CEO of Crystol Energy, discusses the effect of the geopolitical tensions on energy markets. 

Asked whether we are facing unchartered territories, Dr Nakhle argues that we have faced major crisis – both in terms of politics and oil markets. The unchartered territory today is what happens next.

To date, Russia did not cut its supplies – though that scenario cannot be entirely ruled out. However, traders are increasingly turning their back to Russian oil to avoid any exposure to sanctions. 

On the release of the International Energy Agency (IEA) to 60 million barrels, she says that this step has a minimal effect on the oil markets as this volume represents around two thirds of the global oil demand in one day. Instead, OPEC countries, particularly those of the Gulf, could play a bigger role in calming down the markets by releasing much of the spare capacity that is being held.

While it is understood that the organisation is having a cautious approach to that matter, it shouldn’t forget its core role (i.e., to achieve market stability), which doesn’t have a clear definition. If OPEC+ rushes to cut supplies when prices collapse to ‘safeguard market stability’, by the same token they should increase supplies when prices spikes.

The current energy crisis will make governments and agencies reconsider the outlook for oil and gas and the need for more, not less investment, in this sector – unlike what the IEA recommended a year ago.

A nuclear deal with Iran will affect the oil markets but on its own will not be a decisive factor.