The price of crude oil has fallen in recent weeks. But markets remain nervous that growing tensions with Iran over its refusal to suspend its nuclear enrichment programme, the chaotic state of Nigeria’s economy and further provocations by president Hugo Chávez in Venezuela could send the price rocketing into the $80 to $100 a barrel range. Were such prices to be sustained, financial markets would be hit and global growth would slow significantly this year.
But there is another risk to energy prices that is much closer to home: the coming energy confrontation between Russia and Europe to its west.
On the surface, relations remain cordial. Russia holds the G8 chairmanship this year and president Vladimir Putin will host the world’s most powerful leaders at a summit in St Petersburg this summer. Russia’s agreement to refer Iran to the UN Security Council for its nuclear activities was received with joy in the west.
| How Europe depends on Russia for energy: Russian piped natural gas imports as a proportion of total gas imports, 2004 |
| Source: BP |
Behind the scenes, though, something quite different is taking place.