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![Global Oil Prices Surge: What Is Expected In Azerbaijan](https://menafn.com/updates/pr/2023-11/08/A_91b26b9a-5_Image_In_Body.jpg)
Qabil Ashirov Read more
Volatility in the global oil market continues due to the ongoing
conflicts throughout the world. The world has not coped with the
side effects of the Ukrainian crisis on global oil and gas prices
yet, another conflict, the Israeli-Hamas confrontation, erupted in
the Middle East. Actually, because of its scale, the confrontation
has not caused a surge in oil prices drastically so far.
The World Bank says that“energy prices have often registered
substantial volatility following previous episodes of military
conflict in the Middle East. Since the beginning of the latest
conflict, overall energy prices have increased by 9 percent. Oil
prices have risen 6 percent amid uncertainty about the impact of
the conflict on supply.”
But in retrospect, we know that the little conflicts in the
region could flare up into big wars easily. Besides, the news on
the ground gives us reason to presume that the conflict could turn
into a big war at any time, which will force the prices to
skyrocket.
On November 3, the Leader of Lebanon's Hezbollah Sayyed Hassan
Nasrallah made a speech about the Israeli-Hamas conflict and noted
there was a possibility of fighting on the Lebanese front turning
into a full-fledged war.
He added that American interests, soldiers, and fleets would pay
the price if the conflict turned into a war.
It should be mentioned that prior to Nasrallah's speech the
World Bank warned that if the conflict expanded beyond the borders
of the Gaza Strip, oil prices could surge to $157 per barrel.
The Bank reminded the Arab oil embargo in 1973 and stressed that
the possibility of repeating the same scenario is possible. Note
that the Arab countries imposed an oil embargo on the US, as
retaliation for its support to Israel.
However, the World Bank predicts that energy prices, after
dropping by an estimated 29 percent in 2023, are expected to fall 5
percent in 2024 as subdued global growth reduces demand pressure.
They are then projected to edge further down 0.7 percent in
2025.
The Brent crude oil price forecast for this year has not changed
since the April edition of the Commodity Markets Outlook and is
expected to average $84/bbl for 2023, which implies that prices
will average almost $90/bbl in the last quarter. Continued concerns
about the conflict in the Middle East and other geopolitical risks,
the contraction of OPEC+ supply, and pressures from
middle-distillate demand are also expected to support prices in the
last quarter.
However, these forecasts as a whole highlight the expectation
that the conflict will have a limited impact-assuming it does not
escalate into a wider conflict. The forecast also assumes that
global oil production will increase within and outside OPEC+,
provided that some OPEC+ supply cuts are reversed in early
2024.
But the question is: can the increase in oil prices caused by
global influences and the instability of prices in the general
commodity market have any effect on the oil of Azerbaijan and the
economy in general?
According to the opinions of the Azerbaijani economists, the
Middle Eastern conflict cannot cause any serious impact on
Azerbaijani oil. However, the emergence of a general economic
crisis can certainly affect regional states in a certain way,
creating a chain reaction. For example, the global pandemic
followed by the Ukrainian War and the impact of both crises on the
economic situation can be a common example.
Another influencing factor may be the escalation of conflicts.
For example, during the last week, the US military bases in Iraq
and Syria were attacked by Iran with missiles, which can be
considered the emergence of a new source of conflict in the region.
The fact that Iran is a neighboring country to Azerbaijan and
confronts the United States in the Middle East can somehow bring
the Israel-Hamas conflict closer to the South Caucasus. This may
cause not only a serious problem in the increase of the oil price,
but even in security issues.
At a time when global needs are increasing and the economy is
just starting to recover, our world needs more peace and economic
development today. Conflicts have the power to affect not only two
or three countries, but many countries and even the world.
In order to get rid of this influence, Azerbaijan also calls on
the countries of the world to stop the conflicts. Today, Azerbaijan
is signing serious projects in the field of green energy, taking
into account the health of the environment, and calls on other
countries to be close and cooperative around this initiative.
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