Color Revolutions, Geopolitics and the Baku Pipeline

After a short-term fall in price below the $50 a barrel level, oil is now bounding back towards $60 a barrel and likely far higher. In this situation one might think that the announcement of the opening of a major new oil pipeline to pump Caspian oil to world markets might dampen the relentless rise in prices.

However, even when OPEC agreed on June 15 to raise its formal production quota by another 500,000 barrels per day (bpd), the reaction of NYMEX oil futures prices was to rise, not fall. Estimates are that world demand in the second half of 2005 will average at least 3 million barrels a day more than the first half.