Ironically, as hostilities became inevitable, energy prices tumbled, as the benchmark price for West Texas Intermediate crude fell from a peak of $37.83 per barrel on March 12 to below $29 in about a week, says Bruce Cavella, oil analyst with the forecasting firm Global Insights, Lexington, Mass. That is only about $2 more than last December's price, he notes.
"OPEC for months has been saying it would make up any shortfall in oil production caused by a war, and the administration issued statements that the strategic oil reserves would be tapped if necessary, but apparently no one was listening," says Cavella. "All of a sudden, those statements have grabbed some headlines and traders now believe that things are not going to be as tight as they once thought," he says. Prices also got a break as crude finally started to flow out of Venezuela after having production shut down for three and half months by a bitter labor strike, he adds.