How will Russian conflict with Georgia affect gas prices?
When the oil markets closed on Friday, prices had fallen to a 3 month low. This was in spite of indications that widespread fighting was about to break out between Russia and Georgia, which controls one of the largest oil pipelines in the world. The Baku-Tblisis-Ceyhan pipeline carries oil from the landlocked Caspian Sea to the Mediterranean. As Environmental Capital puts it, apparently the oil markets cannot decide which they fear more-the Russian bear or the economic bear. On Friday, it seems the economic bears won the day. However, that was before general hostilities broke out over the weekend between the two countries. It will be interesting to see what happens to oil markets this week, in light of the escalating violence in that region. Of course, much of Russia’s increasing presence on the world stage is related to their windfall revenues stemming from high energy costs. Although the casus belli for this conflict is national and ethnic strife, the fighting in Georgia, and its effects on global markets, will be just one in a long line of global conflicts to come that stem from, or have an impact upon, limited natural resources.
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