Oil more important than radiation

The oil markets are recovering after a setback in connection with the recent developments in Japan and the Middle East. The political turmoil in Arab countries has eventually pushed a radiation threat from Japan off the headlines.

The price per barrel may reach 150-200 dollars over the next few weeks, Russian Finance Minister Alexei Kudrin said on Wednesday. But even though oil prices won’t stay at such a high level for long, the demand for oil is certain to increase in the near future. This opinion was voiced by the head of the analytical department of the National Energy Security Foundation Alexander Pasechnik.

Japanese nuclear plants may all follow the Fukushima scenario, so a “nuclear renaissance” is out of the question and nuclear power will have to be replaced by conventional sources of energy. Venezuela is freezing its nuclear projects indefinitely, and Germany is reconsidering its nuclear facilities’ service lives. The demand for oil and gas is bound to go up and so are the prices.

Oil and gas exchanges reported a fall in fuel prices after Japan, a major oil consumer, cut down oil imports following the earthquake and tsunami on March 11th. President of Japan’s Oil Association Akihiko Tambo says, however, that the country is planning to boost oil output to three and a half million barrels per day by the end of March. Most oil refineries are ready to resume production next week, so a drop in demand was temporary.

The unrest in the Middle East and in the north of Africa has had much more influence on the oil prices and is likely to drag on for a long time. Syria and Yemen are swept by protests, and the riots in Libya have taken the shape of a full-blown civil war. Reports by the IAEA say that it will take months to return to pre-war levels of oil production and export in Libya.

The recent events in Bahrain are adding more fuel to the fire. The king of Bahrain summoned army servicemen from Saudi Arabia to deal with the rioters. The resulting clashes led to casualties. From Bahrain the unrest spilled over into the eastern provinces of Saudi Arabia. This may lead to disruptions in oil exports from Saudi Arabia. Given the situation, the price of oil may exceed 200 dollars per barrel, as the Russian Finance Ministry said it would.

By Natalya Kovalenko

The Voice of Russia, 17 March 2011