The EU referendum has been trending for a while now. Look on any Facebook feed and it will be inundated with so much propaganda and scaremongering from either side that has become a topic of dread for most people.
According to the Brexit Survival Guide, we must face the possibility of freezing our cheese and holidaying in Albania if Britain leaves the EU. On the other hand, are we all, as Michael Gove famously stated, “voting to be hostages, locked in the back of a car”? Neither option sounds particularly great to me, and I’m still not 100% sure which way to vote.
Leaving this scaremongering aside, although the vote largely focusses on issues such as the economy and immigration, the result could have profound implications for the global oil markets.
Brexit will, undoubtedly, have currency implications, and to a certain extent this has been felt already. Nandini Ramakrishnan, a global market strategist at JP Morgan Asset Management, believes that we have already seen a significant devaluation of the pound, as it reaches a record low of $1.38 following the referendum announcement.
So what does this mean for us? Well apart from giving me something else to worry about before going on holiday next week (should I take Euros out now or after the referendum?), it has also presented us with an even more important problem.
If we vote leave, it is likely that the uncertainty surrounding the British and European economies will depress the pound and the euro. In turn, this will push capital flows into the dollar which will, as we have seen many times before, have a depressing effect on oil prices. These effects are however, difficult to quantify: while a low oil price can significantly reduce investment in exploration and reduce the value and exploitation of marginal fields, it can actually be a good thing for many companies that benefit from cheap oil.
Whilst the decision to vote for remain or leave is clearly an individual choice, the impact is likely to be dramatic and the effects will be felt not only in this country, but across the world.
Stay tuned for my next blog post where I will be looking at the outcome of tonight’s referendum!