The oil minister of Venezuela, Rafael Ramirez, said a shutdown of the Suez Canal could push oil prices above $200. “There is sufficient oil (in the market) and there have been no interruptions, but if they close Suez, that could take the oil price to $200,” Ramirez told reporters, according to Reuters.

Comments like Ramirez’s tend to bring speculators into the market as do any statements from large oil producing nations that point to demand problems.

Venezuela’s economy runs on crude and the riches from its oil fields are essential to the future power of president Hugo Chavez. The South American nation would almost certainly like to see crude go higher, even at the risk of the wreckage it would cause the global economy. Chavez can gamble that even a world in recession needs enough oil to keep the price from collapsing. There is no way to be sure if he is wrong.

The net oil importing nations like China and the US will have to hope that greater problems in Egypt may be offset by increased production from OPEC and other large exporters like Canada and Russia.  OPEC has said its believes that oil prices at $80 are acceptable. Its economists have already done the calculus about a sharp spike in oil above $100. Their conclusions may be different from those of Chavez.

No matter what the immediate causes may be, Brent Crude is above $103. Egypt is still a concern as is the slowdown of permissions for oil companies to drill in the Arctic and the possibility that the new pipeline from Canada to the US may not be approved. Rebels in Nigeria have threatened to attack more oil drilling and refining facilities. The reasons for a panic about crude prices become more plentiful and are still growing.

Suez may be the near term problem, but it is hardly the only one.

Douglas A. McIntyre

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