…Or is this a new oil crisis?

I’ve been noticing lately people making meaningless comments. That’s why; I’ve decided that we need to refresh our knowledge of things.

First of all, the fact Oil Prices kicked off a strong start to this week may have already reach a stage, capable of affecting the upcoming Fed decision. Because, the upward trend in oil prices is a delicate matter both for America and the Americans.

Cars and other vehicles of similar nature are vital to Americans, as for the gas, it’s the supplementary product. Any drastic rise in fuel prices would bring negative impacts on automotive industry as well. I don’t who stirred up this crisis in the first place. I also do not know the reason or reasons behind it. But, I do know that Trump’s maximum pressure campaign against Iran may risk a catastrophic war. The driving force behind this hard-line campaign will involve blaming Iran for oil price hikes so as to provoke American Citizens to anger. White House counsellor spoke to the press at the White House, saying that Trump administration ready to tap strategic petroleum reserve if necessary.

The truth is oil prices haven’t touched an alarming level yet. However, they fell back again when it was remaining around 15%, compared to last Monday evening. Let me also remind you that, a year ago, crude oil was being traded at $80 per barrel.

“Oil price is too important for Turkey…”

If oil price hits $80 per barrel again, the bold statements the government delivered about Turkey’s current account deficit may come to nothing, which means Turkey would start running current account deficit in a shrinking economy. Obviously, economy officials would claim that Turkish economy is not the one to blame for such deterioration, but if we do this, financial institutions’ convictions about the fragility of Turkish economy would be confirmed. As I’ve mentioned in my previous reports, “fragility vis-à-vis energy prices”, one of the 10 things foreign investors investigate before investing in a country, may become real.

Why so sharp rise in oil prices? Here’s why: if memory serves me right the last major oil supply problem occurred due to decreased oil output in the wake of the Iranian Revolution, with 5.6 million barrels per day. Today, total oil production has been cut down by 5.7 million barrels per day. Obviously, the circumstances are different now. So, even though this problem may be considered an “all-time oil output cut record”, it’s not really so upsetting given extremely large-scale oil production today. Here’s an example to further clarify: OPEC’s daily oil output couldn’t reach 20 million barrels before the 1990s. Today, OPEC’s total output averaged 33 million barrels per day. That is to say, even we face a decline as sharp as the one occurred during the Iranian Revolution, its impact to today’s circumstances won’t be as frightening as expected.

I do not overlook the possibility that all these problems may risk a war against Iran. In such case, we should be ready to face oil price hits up to $100 per barrel, which would sadly worsen Turkish inflation and current account deficit.