Alaska Pipeline Shutdown Has Immediate Impact on Oil Prices
The news sent crude oil prices higher by over 2% to nearly $90. Traders are concerned because the pipeline carries about 15% of U.S. oil output.
The Alaska Pipeline is rarely mentioned as a factor that affects the price of oil. Recent debate has centered on increased demand in rapidly growing nations like China and the refusal of OPEC to raise output. Crude prices can also be impacted by weather, especially in the Gulf of Mexico, which is sometimes plagued by hurricanes. But the hurricane season has already come and gone. Political instability in some large oil-producing nations is a more acute issue. Iraq, Iran, Venezuela, and Nigeria are among the ten largest oil producers in the world based on reserves. Rebels in Nigeria have disrupted oil operations in that country, and the political situation in the other countries is constantly open to question.
A pipeline break may raise crude prices, but it also shows how unpredictable events can quickly change perceptions of oil supply and demand.