You have probably heard that the threat of U.S. airstrikes on Syria caused a spike in global oil prices. You have have even heard that the spike subsided somewhat when the British House of Commons rejected an authorization for British participation in said airstrikes.
But the thing it is important to understand is made clear by Neil Irwin at Wonkblog this afternoon:
The strange thing about this is Syria itself produces only a trivial amount of oil. Syria’s output has indeed plummeted as its conflict has become severe. As our colleague Steve Mufson noted the other day, its oil output is down to 50,000 barrels a day, from 350,000 barrels a day in March. But that is small potatoes against 90 million barrel-a-day world of oil output….
Clearly, oil traders aren’t just responding to this or that supply disruption, but making bets on the long-shot probabilities of an all-out conflagration that spreads to bigger oil producers elsewhere in the Middle East.
That’s a double inducement to second thoughts about airstrikes: their certain impact on oil prices, which will hurt a fragile U.S. economy, and the possibility that oil markets know something we ought to know about the likelihood of it all getting out of hand.
As Matt Yglesias summarizes it:
I’m not going to pretend that cheap oil is some kind of decisive consideration. There’s a strong case for not bombing that has nothing to do with oil. But the potential negative impact on the American economy is something hawks should address, and the predictive aspect of the oil futures markets is another thing hawks should address. The Arab League seems to think on a political level that bombing would be destabilizing, and oil markets seem to agree.
To the extent that so many American policymakers don’t seem to have a clear “endgame” in mind if we intervene in this situation, these are bits of importance evidence that matter.