The Bombs and the Ceasefire: How Much of a Role Did Geopolitics Play in Oil Price Movements?

Very interesting article this morning in the FT on how oil traders correctly called the recent flare up the Middle East.  The same basic sentiment is shared by one in the NPR, which cites a range of factors underscoring the dynamics of the market and the extent to which geopolitics often has little to do with price movements (cf:https://lnkd.in/evmpN8TZ)

Both articles really go to the heart of my risk governance board at PRS, and the people that I have retained since purchasing the company over 15 years ago.  Second degrees in a relevant discipline, combined with significant practical experience in applied fields complimentary to geopolitics is essential. All of us have been around for some time!

As such, combined with our proprietary qualifying criteria and risk bands in our models, it wasn’t too surprising that the profiles of Iran and Israel continued to move within these bands during and after the US bombing (which is very important to the pricing of risk instruments), while others, such as Egypt, began shifting outside these areas at the outset of the conflict earlier this month.

Our International Country Risk Guide (ICRG) and the data series it holds, has now appeared in over 1,000 published articles – something of which I am incredibly proud – which in turn provides the firm with a kind of ‘academic cache’ that is unique in the field.

In any event, one solid study that was brought to my attention during the current crisis, published in Public Choice several years ago, found the export of natural resources were correlated with incidents of corruption.  (https://lnkd.in/e9kQE8z5).

There’s lots to the study and several factors captured by the ICRG model have shaped this correlation.  Have a look if you have the time.

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CHRISTOPHER MCKEE, PHD CHIEF EXECUTIVE

Christopher McKee is PRS’ CEO and Owner. An international political economist, global investor, entrepreneur, and author, Chris received his PhD from Queen’s University (Canada) and has been involved in the field of geopolitical risk, limited recourse financing, and private sector development for the past 25 years.