Any disruption in the supply of oil — which is essential to the effective functioning of the modern, global economy — has an immediate, often damaging effect on international trade and markets.
Not only does the resulting higher cost of oil often feed through to the price of other goods and services, but the volatility it causes on world markets is dangerously destabilising to the already fragile international economy.
Most frustrating to those companies and traders who are trying to build a business, rather than make a quick buck off speculation, is that the volatility in the oil price often has nothing to do with supply and demand, but is a result of political tension. The stand-off between Iran and the US and others over the Middle-Eastern country’s nuclear ambitions is but one example of this. Iranian and American sabre-rattling is seen as a threat to the flow of oil to world markets through the Strait of Hormuz.
The opening of the oil pipeline across the UAE, from Abu Dhabi to Fujairah, is important for the security of global oil supplies and to help stabilise international markets. The pipeline will allow the UAE to continue exporting oil even if efforts are made to block the strait, through which an estimated fifth of the world’s oil flows. It is a timely, strategic investment given the increasing political and security concerns around Iran and other oil-producing countries surrounding the Arabian Gulf.
Besides being of benefit to the global economy, the pipeline is a major infrastructure development in the UAE, which will enable it to secure its oil revenue and allow its economic development to increasingly become independent of the regional political situation.
The success of the new pipeline must encourage other oil-producing countries to improve their export infrastructure and co-ordinate their development plans. By building a global network that is flexible and able to respond to the needs of the market and political tensions, oil producers will be able to maintain stable, sustainable prices for the benefit of all.