According to economic reporters, following the published report of the consulting company Verisk Maplecroft, the price of oil has risen due to investors’ concerns regarding the political stability of countries that are among the leading suppliers of oil on a global scale, namely Algeria, Chad, Iraq and Nigeria. As a result, on 26 March 2021 at 10:37 am CET, West Texas Intermediate (WTI) light oil traded on the New York Mercantile Exchange (NYMEX) commodity market at US$ 59.74 USD per barrel with the current daily increase of +2.02%.
WTI’s European light oil counterpart, the Brent North Sea crude oil also traded – at the same time – in a bullish market, rising by +1.76% to US$ 63.04 per barrel. According to the technical analysis, since the beginning of this year this price represents an increase of +21.93%, and in annual terms the price of Brent crude oil has increased by +61.68% in the last 52 weeks. A slightly higher increase was also seen with WTI, which since the beginning of 2021 has increased its value by +22.74%, and in the overall annual comparison it has increased by +69.14% in the last 52 weeks. According to analysts and commodity market financial strategists, this price increase was caused by the impact of the global coronavirus pandemic.
In its 2021 Political Risk Outlook, which was published on Thursday, 25 March by the consulting firm Verisk, it was stated that countries that had failed to diversify their economies from fossil fuel exports were facing a “slow-motion wave of political instability.” With a move away from fossil fuels, which is set to accelerate over the next three to 20 years, and the Covid-19 pandemic eating into short-term gains in oil export revenues, Verisk has warned that oil-dependent countries have not yet adapted to the risk factors such as changes in credit risk, policy and regulation. Although some countries are increasing investment in fossil fuels in the short term, consensus estimates suggest that the “peak oil” will be reached in 2030, after which the transition to a low-carbon economy will accelerate and will force oil-producing countries to adjust their sources of income.
Since oil prices fell in 2014, most exporters have either stagnated or reversed their efforts to diversify their economies, Verisk’s data highlighted, many of which doubled production in the coming years to fill income gaps. “Currently, if countries’ external break-evens – the oil prices they need to pay for their imports – remain above what markets can offer, they have limited choices: draw down foreign exchange reserves like Saudi Arabia since 2014, or devalue their currency like Nigeria or Iraq in 2020, effectively rebalancing their imports and exports at the expense of living standards”, the report explains. The most vulnerable countries are higher-cost producers, who are heavily dependent on oil for yields, have less diversification capacity and are less politically stable, making Nigeria, Algeria, Chad and Iraq the first to be affected.