Geopolitical tensions are pushing energy prices higher, expert says

Geopolitical uncertainty and fears over conflicts are driving energy prices up, energy and security expert Raivo Vare told ERR’s Vikerhommik radio programme. He said the United States has the greatest influence on energy markets.

Fear tends to raise prices for scarce resources, including energy and fuel, Vare said, pointing to ongoing conflicts in the Middle East and Ukraine. Diesel shortages in Europe are also being driven by refineries producing more lighter fuels, such as petrol and aviation fuel, and less diesel.

Competition on the international gas market is pushing prices higher, which in turn is raising electricity and heating costs in Estonia, he said.

Vare said the United States is the world’s largest energy producer and consumer, and also exports more than two million barrels of diesel a day. US actions affect markets both politically and through economic measures, he said. China has also influenced supply by sharply reducing crude oil imports and restricting exports of oil products, while drawing partly on its large reserves.

Several upcoming political events could affect energy prices, Vare said, including Israel’s general election on Tuesday, US midterm elections on November 3, expected three-way talks on ending the war in Ukraine, and the APEC annual meeting, where the leaders of the United States, China and Russia could meet. He said it was difficult to predict whether prices would rise or fall.

Forecasts from major energy-market institutions suggest oil could reach $120 a barrel or even $150. Vare said prices depend on supply and demand as well as market sentiment. When market prices had risen to $120, spot prices for oil cargoes aboard ships had already reached $150, he said.

While OPEC has little room to increase production further, lower global consumption could mean demand is weaker than expected and prices fall somewhat in 2027, Vare said.