Wed, 12 Jan 2011|
Last week as the news was focused on Gaza and rising tensions in the middle east, Tom was questioned about the potential short and longer term impact geopolitical issues may have on the price of crude oil. Tom maintained that geopolitics has periodically played a big role in the price of crude oil. ...
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Let's get more details. On exactly how much geopolitical factors are really affecting the price of crude oil joining us now from Denver Tom Petri. Vice chairman of Merrill Lynch Petri hi Tom thank you for joining us. You do -- -- list okay it. How much do geopolitics play into this obviously. If you look at what's different we know that this situation has escalated certainly between Hamas and Israel but we also have to play in the very weak dollar. And and to be fair the fact that oil has fallen so precipitously over the past couple of months but how much of the picture of geo politics of race attend. We'll geopolitics periodically -- plays a really big role but certainly from. From September on through to the end of this year increasingly is spent a more of a demand story. Then it has been a yes -- story. And the geopolitics. Really Arab are more important in periods when when we're talking about constraining supply. It's real clear now that because of what's happened with the man. We're gonna have fairly comfortable supply relationships. And even -- the kinds of things that happened just now. If we if we didn't have the -- Holiday volumes. I don't think we would have had this impact. Remember as we think about the first and second quarters coming up we're going to be looking at. Is it gonna be a cold winter or not. And then we have to navigate the shoulder months when demand drops off so I I don't think right now. That geopolitics terrorism point and there's other times the one caveat. Would be. That you know this whole notion of whether there's a test coming. For president elect Obama -- or variable after the inauguration. From the from the Russians -- to the degree. They look to continue to exacerbate it then then the geopolitics could come right to the fore again well. The what I what I find always interesting when there is conflict between say for example Lebanon and Israel or Gaza and Israel. Is that there's no oil production there none at all right yet people get worried about the tensions somehow. That impeding the flow of oil from the Middle East and -- suppose if you were to play and if if certain countries take sides certain Arab oil producing nations take sides. Then you'd have something to worry about but we don't have that here -- we Tom. -- you so far we don't but but some have taken sides -- Iran is certainly active in dealing with the with the Palestinians. Through a couple of up proxy organizations. And so you've got that dynamic going on. And this is a particularly sensitive time because we have to see what's gonna happen. With the new administration. And the decisions they'll be making about. The troop levels and the timing of troop level will reductions in Iraq and then how much does that affect. Moves that could happen that. Against the backdrop of of rising tensions again between Israel and its neighbors is not a good combination. Okay so I'm hearing you say that maybe not right now -- the time where we should focus on geopolitics but perhaps after Barack Obama takes. Presidential office and then we might see those tensions perhaps gel -- solidified some some type of way. Exactly depending also what else is happening there's been a move by the Russians to provide fighter planes to Lebanon. That's a challenge -- the US which is traditionally. Had the relationship there there's a lot going on in the Middle East that over the next. 123 quarters 123 years. How we have to keep an eye on. And you know what Tom I should mention -- -- come February while Israel we'll have a new prime minister and and the word is that it will be. Bibi Netanyahu who he is up more conservative when it comes to having more of an iron fist. Against the problems as far as Palestinians are concerned and so perhaps that only increases -- but there could always be a surprise with him we don't know but. Tom Petri of Merrill Lynch thank you so much have a good holiday thank you for coming on. Good to see it.