Why do oil prices increase after geopolitical event?
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    Default Why do oil prices increase after geopolitical event?

    I read that during 1997 the UN tried to inspect Iraqi weapons but the Iraqi government refused and this created suspicions of renewed conflict in the Middle East causing oil prices to increase. I don't understand why the prices increased...

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    Quote Originally Posted by Katlego King View Post
    I read that during 1997 the UN tried to inspect Iraqi weapons but the Iraqi government refused and this created suspicions of renewed conflict in the Middle East causing oil prices to increase. I don't understand why the prices increased...
    Not all geopolitical events result in oil price rises and it is not a simple issue. But, simplified, this is a question of supply and demand. The middle east is a major oil producing area and any conflict may well inflict damage on oil wells, pipelines, transporters, etc which could cause significant and immediate reduction in crude oil flows.

    Since all countries are large consumers of oil products in its refined state, any major interruption of supply would immediate place strains on inventories held. And as stocks dwindle, or are anticipated to dwindle,so the price will start to rise.

    Libya is a good current example of this. There is a major conflict going on there now and pipeline flows to the coastal terminals for loading on tankers has been interrupted and shut off. This has already happened several times there.

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