As I met with the Polish officials last Friday in Krakow to begin government sessions on shale gas policy, and European Union (EU) ministers met in the southwestern city of Wrocław, Poland, thoughts turned once again to oil pricing.
In case you haven’t been watching, Brent prices in London are approaching $113 per barrel, while the West Texas Intermediate (WTI) benchmark traded in New York is about to break the $90 per barrel level again.
The spread between the two remains at all-time highs, indicating that Brent will continue to appreciate quicker than U.S. pricing, although both are rising.
That spread is “in favor” of Brent.
This creates a continuing problem for the EU, which is faced with mounting Eurozone currency and liquidity problems, weakness in its banking sector, and a European Central Bank (ECB) that’s experiencing dissent – within its own ranks – over the proper course of action regarding Greece’s debt issues.
Friday’s meeting in Wrocław concerned whether Greece will receive the next tranche of a bailout package. That package is already widely perceived as being insufficient to prevent some sort of Greek default. Plus, the Germans are taking a hard line on what is necessary for that largess to keep coming.
Meanwhile, the internal dispute is getting intense.
A good example is the decision made last Friday morning by the ministers. Or perhaps more accurately, the non-decision. The ministers decided, well, not to decide until next month.
The prospect of higher prices for Brent further complicates matters with the common currency.
The euro has been losing ground against the dollar throughout the latest period of the debt crisis. Of course, that says less about the dollar’s strength than it does about the euro’s enduring weakness.
That, combined with a rise in the cost of energy, means Europe is facing the prospect of a new economic crunch.
This one has the potential of completely derailing this continent-wide recovery already distinguished by its anemic performance.
In Krakow, Too, Our Problem Is Oil
There are essentially three reasons Poland has decided to expedite decisions on developing its domestic shale gas.