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Oil price climbs ahead of crucial Greece election

Greece consumes a small amount of the world’s oil. But it could have a big effect on the price of crude next week.

The nation holds an election Sunday, and Greeks could pick a government that wants to stop using the euro as its currency. That could spawn turmoil in global markets, including oil.

Why would Greece leave Europe’s common currency? Greeks have been chafing under austerity measures imposed on their country in exchange for a bailout loan from European neighbors. If Greece decides to exit the euro, it could cause short-term panic. In the long-term, that could worsen Europe’s financial crisis, and drag down economies in the US and China. Slowing growth hurts demand for oil.

Oil prices have already fallen 21 percent since May 1 on those fears. Traders and analysts braced themselves for more potential drama Monday, the day after the election.

“The concern is that we may be looking at not just a recession in Europe but also financial instability that could affect the rest of the world,” said James Hamilton, a University of California-San Diego economics professor who studies oil prices.

Europe consumes about 17 percent of the world’s oil. Greece represents about one-half of 1 percent of global use.