Norwegians woke up to a sharp rise in oil prices on Wednesday, after traders reacted to the potential for a western military strike on the Syrian government. North Sea crude was trading at around USD 117 per barrel, up from USD 110 on Tuesday, but that’s not necessarily good news for the Norwegian economy.
Thina Saltvedt, senior analyst at Nordea Markets, told Norwegian Broadcasting (NRK) that it’s “extremely seldom” to see such a large price rise in such a short time. It was linked to the uncertainty over whether the US and UK may launch a military strike on the Assad regime in Damascus, in retaliation for its alleged use of chemical weapons against Syrian citizens.
Stock markets fell while oil prices were affected by news of even bigger conflicts in the Middle East, and what western military intervention might mean for the oil-producing region. Saltvedt noted that transportation of oil from the Middle East can be disrupted.
Higher oil prices also lead to more money flowing into the Norwegian state treasury, because of the country’s own oil production. That’s generally seen as positive, but Saltvedt warned that high oil prices can lead to other problems, not least in Europe which is just starting to recover from the past five years of economic crisis.
Higher oil prices can dampen growth in Europe, which serves as Norway’s biggest export market. “That’s the last thing Europe needs now,” Saltvedt told NRK.
It will also mean even higher prices at the pump for gasoline, which Statoil’s retail division said would hit record highs on Thursday. Business news site E24 reported that Statoil planned to boost prices for unleaded gasoline in the Oslo area to NOK 15.71 per liter (roughly USD 10 a gallon) and diesel to NOK 14.40. Prices are often even higher in outlying areas.
“When the refineries suddenly have to pay more for their crude, it’s quite natural that they set up prices for their refined products,” Saltvedt said. Higher fuel prices will also mean higher transport costs, which sellers will try to recoup.