October 2014

Playing with oil prices: a global strategic sport?

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By Ernesto Gallo, Giovanni Biava

Oil prices have been recently falling; many commentators wonder why. After all, this is quite a surprise, if we consider the current turbulences in oil-rich Middle East. One possible explanation is the global slowdown of the world economy; after all, China’s growth is by now in the region of 7-8%, clearly less than the 11-12% it recorded just few years ago; India, too, has slowed down; the two giants together represent more than 2.5 billion people and of course have a huge impact on the global demand. Another explanation points to USA investment in shale energy. While it is true that USA shale oil extraction has risen by 53% in the years 2008-13, and the States might become the world’s largest oil producer in 2014, it is also true that this boom might not last long. Drilling costs are high and in 2013 USA domestic production still covered only 55% of its overall consumption. In other words, the shale oil boom might remain a temporary phenomenon. Leaving aside American shale, what has surprised the markets has mainly been Saudi Arabia’s choice to cut oil prices, as announced on October 1 (Wall Street Journal, 1 October) and followed by further cuts in other Gulf countries.

EU Must Commit to Free Trade With Ukraine

By Ulrich Speck

The European Union suddenly and surprisingly changed its long and firmly held position that Russia has no right to interfere in its relations with Ukraine on Sept. 12. EU Trade Commissioner Karel De Gucht announced that an agreement had been reached between the EU, Russia and Ukraine to delay the implementation of a deep and comprehensive free-trade agreement (DCFTA) between the EU and Ukraine.