"Is black gold still the engine of the global economy?" Sometimes I'd be tempted to answer, "Absolutely yes!", but there are also times when my immediate response is, "Absolutely not!"
Oil is silent in its back-and-forth, and its prices fluctuate rapidly, in tune with the inexhaustible shifts in the world's moods. Today, as yesterday, its price continues to be based on an unstable equilibrium, shaped by geopolitical tensions, wars (real and imagined), and diplomatic statements (incendiary or simply hypocritical). The price of oil behaves like a drone, and its tireless pilot is that "psychological frown" that has always held the reins of price levels.
I'm reminded of what happened recently, regarding the conflict between Israel and Iran: the threat of blocking the Strait of Hormuz was enough for Brent crude to rise by $10 in a matter of days. But when everyone realised that no one would block the Strait of Hormuz, the price of oil immediately (and equally quickly) reversed.
But now, where should we look? To the geopolitical crises? To the actual/false energy transition? To OPEC and its twists and turns? To the logistical problem? Or should we keep in mind that the price of oil (as a financial instrument) matters more than the price of oil (as a physical commodity)?.
Let’s explore.