Brazil: Another reason for high oil prices

by Dave

Oil prices 1996-2008 (not adjusted for inflation)Image via Wikipedia

Oil workers at Petrobras, the Brazilian oil company, have gone out on strike. Brazil is a modestly important supplier of crude, but with the recent discovery of large off-shore deposits, its role is likely to grow.

According to Bloomberg, the strike “may cut Brazilian daily oil output by more than half.”

The strike raises two problems, one short term. The psychology of oil prices is so fragile now that even rumors of supply interruptions push crude up. The other, more important problem, is in the future. Brazil’s new and significant oil reserves will make the world more dependent on the country for crude. If the workers can strike now to get higher wages, they can strike later. That puts Brazil’s output at a level of permanent risk.