Varcoe: Oil prices 'to spike higher' as conflict in Middle East casts shadow over G7 energy security talks
Energy markets will also be closely watching to see any signs of potential disruption to Iranian oil supplies, as the country exports about 1.5 million barrels per day.
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'Until you really get time to look at the end game here, prices are likely to rise. I don't see it going above $100, but I wouldn't rule it out entirely,' Robert Johnston, senior director of research at the Center on Global Energy Policy at Columbia University, said Sunday.
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'The G7 was going to be more focused on Russia, and the U.S. trade agenda and other priorities. They will have to deal with the oil side now.'
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Analysts say events will make the G7 countries look more intently at how to ensure there's ample access to energy if something disrupts the flow of oil or LNG exports from the countries in the Middle East.
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'Even after the Russian invasion, we have not taken energy security seriously — as seriously as we need to,' said Richard Masson, an executive fellow with the University of Calgary's School of Public Policy.
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'It's just one more indication that the world is a dangerous place and energy security matters.'
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Even if Israel and Iran end hostilities within a few weeks, Tehran is unlikely to be a 'reliable supplier of oil to the world for a long time' and it may be difficult for oil shipping firms to obtain insurance to move oil through the Strait of Hormuz, said Masson, a former vice-president of risk management for Nexen Energy.
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Heading into the summit, U.S. President Donald Trump frequently called on his domestic oil and gas industry to 'drill, baby, drill' and promoted the idea of energy dominance.
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However, a U.S. EIA report last week — issued before the latest conflict — projected American oil production will dip slightly next year from record levels of 13.5 million bpd, due to expectations of excess supply and weakening prices.
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The tricky part for the G7 will be to find common ground between the group on what energy security is and how to best reach it, because the idea 'means different things to different people,' said Robert Johnston, incoming director of energy and natural resources at the U of C's School of Public Policy.
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'Can Carney put together a common view between the U.S., which sort of sees more supply growth as the answer to the energy security question, versus the Europeans, and to some extent, Canada and Japan, that want supply growth, but also more decarbonization?' he said.
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And the biggest potential risk the markets will look for in the coming days is a possible attack on tanker traffic in the Strait of Hormuz, damage to Iranian oil-exporting infrastructure, or an attack of onshore oil facilities, such as refining and petrochemical infrastructure in the region, Johnston added.
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