The sovereign debt crisis in the Euro zone, the question of the recapitalization of troubled European banks and the ongoing poor performance of the U.S. economy have dominated economic news. These developments almost caused oil prices to chute, were it not for the gradual resumption of Libyan oil exports, curbing the downward trend in oil prices. Nevertheless, this did not do much to limit changes in prices in September. The rate of OPEC crude basket price hovered between 102 and 112 dollars per barrel during the same month, before falling in early October to below 100 dollars per barrel. In truth, this has raised concerns among some Arab officials, who have since warned of the gravity of falling prices on their countries' budgets should they fall below 90 dollars per barrel. It is expected, in light of the information currently available, that volatility in oil prices would continue, especially because of the difficult task ahead for the European officials to reach an agreement that is credible to the markets over a solution for the Greek debt crisis, or the difficulty, for the United States, to find effective solutions for its economic woes, amid partisan disputes that are currently preventing passing consensus legislations in Congress. With regard to the gradual return of Libyan oil to the markets, this is not expected to regain its previous levels, i.e. approximately 1.7 million barrels per day, before mid-next year, on the assumption that political and security conditions will be relatively stable throughout. Oil markets are now at an important crossroads, regardless of international crises. For despite these dangerous crises, oil prices remain above the 100 dollar mark. Forecasts estimate that global oil consumption rates will reach 90 million barrels per day by 2012, despite the widespread use of alternative fuels and a reduced share for petroleum in the transportation sector. Further, demand for OPEC oils remains stable at a rate of around 30 million barrels per day, which means that demand for OPEC oils, despite the successive and increased discoveries of reserves outside OPEC countries, remains on the rise. The size of demand for oil has also become nearly the same in both industrialized countries and emerging nations. In 2012, demand for oil in Western industrialized countries and in emerging countries will reach around 45.6 million barrels per day, and 44.9 million barrels per day respectively. This will lead to increased focus on emerging markets and stronger collaboration with national oil companies. However, despite these novel record rates, OPEC and the IEA both have voiced warnings of the many pitfalls facing the global economy and oil markets in the short period ahead. According to the IEA's forecast, global economic growth will drop to almost 3.7 percent in 2012. At the same time, the agency maintains that there are factors that, despite the steady decline in global growth rates, will be able to push these rates up, something that requires caution. The agency underscored the robustness of emerging economies, the primary engine of global economic growth and oil markets in recent years. Nonetheless, the IEA cautions that the governments of China and India might adopt new policies aimed at increasing local fuel prices, in order to curb energy consumption and inflation in both counties. The main reason to be cautious with regard to possible future snags in the oil markets lies in the repercussions of economic crises on Chinese and Indian exports. The first signs of this appear in the forecast by the IMF which states that Asian economic growth will decline because of the fallout from the sovereign debt crises in the Euro zone, and reduced growth in the U.S. economy. A prelude to this warning came through the Chinese trade balance, which showed a decline in exports in September compared to August, and also relative to September 2010. As is known, the main driver of China's economy is exports, unlike the United States, where the local market is the pillar of the consumer market. The economies of China and India will no doubt be affected by global crises. It is difficult to separate between both economies on the one hand and crises on the other, given the size of exports and imports exchanged between the two countries and the rest of the world. It is all a matter of time, bearing in mind that the interruption of Libyan exports has helped avoid a significant drop in prices in recent months. *. Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
