Faced with economic meltdown, only shopping can save us now

Doubtless, it's a reflection of yet another remarkable year for oil, energy and economies. A year in which geopolitical fears have grappled with economic woes to see which would hold sway over oil and commodity prices.

From regime change in North Africa to the perils of the eurozone; the US military withdrawal from Iraq to the increased tensions over Iran; from the discrepancy between WTI and its North Sea Brent counterpart; a disagreement within OPEC and a stock release from the IEA: the price and fundamentals of oil have seen one of their most remarkable years.

Without ever attaining the heights of 2008, the year itself has left its mark on economies globally as the above factors sustained the price of crude oil at levels that have never before been seen in human history.

The average price of dated Brent throughout the year will come in at around $111/b (compared to $97.25/b in 2008), according to Platts data, making 2011 the most expensive year for oil to date.

Perhaps nowhere have the challenges that 2011 has posed been more acute than in the eurozone. Sure Obama has his problems tackling deficits with a Republican House, but the problems Europe faces have at times seemed insurmountable.

Central to the issue is, of course, how to support the ailing economies of Europe, crushed beneath unimaginable debt, without dragging the powerhouse of Germany into recession or fracturing irreparably the eurozone itself.

These are not easy questions to answer, and I do not seek to make light of that fact. But the opportunity for me to present on Platts methodologies to a range of people within the oil and financial industry in many of Europe's major cities provided me with an interesting snapshot of the state of the eurozone. And the sometimes irrational factors that are driving it.

For countries on the periphery, the eurozone's problems have been closely monitored. Turkey, for example, is a country that has stood outside the EU but shown a certain keenness to be allowed in. During a visit to Istanbul in September however, many of Turkey's business leaders showed a marked reticence to move towards closer integration with the European Union. For Turkey, a country that stands at the cross roads of energy - a key stage in the path of oil and gas from the Caspian region, and a significant growth country in economic terms, the sickening of the appetite for EU membership is a major change.

In Switzerland too, at the heart of things geographically, encircled and besieged by the eurozone, the country's own issues lie with the impact of legislation aimed at cutting down the activity of speculators in driving oil prices. For some companies, the more stringent rules that are set to afflict Wall Street could have driven some of them towards the Swiss cantons as a way of sheltering from the full force of tighter compliance.

For Geneva, the city has become full - accommodation and office space is at a premium, those traders living in the city said, and new entrants are apparently struggling with the costs of living and the facts of finding space.

There are some newcomers who are still finding places to live amongst the regular inhabitants of the city though. The Occupy movement, for one, has taken up residence in the city's central park - with the encampment sufficiently organized to boast a recycling facility for on-site protesters, proving that you can be an anarchist and still consider the environment.

At the center of the eurostorm however, lies Italy - the third biggest economy in the eurozone. The mood amongst many of the figures I met in Rome was muted as the country awaited the fall of Berlusconi and the ascent of Monti in early November. There's little doubt that the country has been damaged, but its too-big-to-bail-out status marks it out as the big worry for the eurozone and its fair to say that Italians find the position of their country difficult to take.

Alongside them, Spain remains a country that is mired in major economic problems. For many amongst the country's oil interests, the concern focuses on the state of internal demand. Following a series of upgrades at refineries in Spain and Portugal - many of them financed, planned and initiated during the golden age of refining - the country now looks to be bordering on long diesel, with flows needing to be exported beyond the Iberian peninsula as demand fails to soak up the new supply sources.

France is perhaps the most interesting country within the eurozone though. Its much-vaunted triple A rating has been called into question over recent months, and its fair to say that Gallic pride has been clearly dented. For many within the banking sector particularly, the inability to trade in dollars has severely limited European banks' activity, and provoked whispers of conspiracy amongst the bankers of Paris.

Some of the more extreme voices I spoke to talked of US conspiracies to highlight Europe's problems as an attempt to divert attention from the scale of their own problems. Another accused the US of turning the eurozone into a playground for US hedge funds.

Some voices still pressed for a change in oil trading currencies, with one person suggesting that the euro could still work as an international currency for pricing oil. That, at a time when commentators from outside the eurozone were actively forecasting the demise of the euro within a matter of months.

A visit to Hamburg in October suggested the pace of change continues for Germany with little sign of any slowdown. The German government exudes confidence in its own ability to work its way out of any problem, while the chance to stroll about the city also gave me my first close encounter with an electric sports car. The Tesla hushed soundlessly from a side road and caught me by surprise - not least because up until that point it was something I'd heard of but never seen any physical proof of. More pertinently, it surprised me because I didn't hear it coming as I stepped out into the road.

Even outside the block, irrational behavior can be discerned and perhaps nowhere more so than in my own country.

In the UK, retail prices of road fuels have reflected the strength of crude and remained around their highest levels for much of the year. Across the eurozone, the weakness of the euro versus the dollar has had a similar impact, elevating retail prices to levels seen when crude was at $147/b and offering no respite for European economies already under the cosh.

That strength in retail prices has already seen the UK government scrap a proposed increase in duty that was due to herald in the new year. Meanwhile, the steadfast strength of crude has had airlines and their representatives firing warning shots over the health of the industry. The International Air Transport Association issued a statement in September warning of a tough 2012 in the offing.

And, in the face of all this doom and gloom, the British end user did what it likes to think it does best. It shopped. And then it went on holiday. And, in spite of the sustained strength of fuel prices, the famed elasticity of road fuel demand seems to continue to twang.

UK motoring organization the Automobile Association warned of delays as up to 18 million cars would be traveling on Christmas Eve this year - well over half of the country's entire car population.

Alongside that, the British Airports Authority, operators of London Heathrow, expected 780,000 people to depart the country through the London hub over the course of the Christmas weekend, with New York and Dubai the top two destinations.

It's too early to say whether these factors will continue to drive prices into the new year - but as the calendar tips from the complex, contrary and sometimes tragic events of 2011, the irrational will once again play its role in driving the fundamentals of 2012.

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