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Oil prices have been falling. That's not new as oil prices have been going up and down for years especially after 1967 when the first Arab oil embargo got underway just after the Arab/Israeli Six Day War that started on June 6, 1967. Grant you at that time the actual impact on oil prices was muted but when the second Arab oil embargo hit in October 1973 following outbreak of another Arab/Israeli war known as the Yom Kippur War oil prices leaped from roughly $3.50 to over $10 in a matter of weeks.

Over the years, oil prices have probably been influenced by geopolitical events as much as it has been influenced by supply/demand factors. Not that supply and demand don't play a role. The prime reason given for the recent decline in oil prices is that global demand is falling. Europe and Japan are showing signs of sliding (again) into a recession (parts of the Euro zone are considered to be in a depression) and China is slowing down. The US remains in a positive economic trend and with fracking, the US has been adding considerably to supply.

On the supply side, the Energy Information Administration (EIA) reported that global inventories grew by 500 thousand barrels a day in August. The EIA reported that global supplies are rather loose at this time. Global consumption is estimated at 91.55 million barrels/day in 2014 vs. supply of roughly 91.68 million barrels/day according to the EIA. The International Energy Administration (IEA) expects OPEC to have lower oil production in 2014 and again in 2015. The drop in production is a result of lower demand. The IEA's forecasts of supply/demand for 2015 are 93.8 million barrels/day against supply of 94.2 million barrels/day. That small margin of supply over demand is considered "a world awash in oil".

Global oil supply has been strong even as there have been ongoing conflicts in Iraq and Libya. Iraq's major oil fields are located in the south of the country and are not being threatened by the conflict with Islamic State (IS). In Libya, there is a civil war but despite the war, there are many who believe that Libya could increase production. In North America, the fracking boom is adding to supply even as fracking is increasingly being criticised by environmental groups.

Could geopolitics be behind the drop in oil prices as well? Often when oil prices are rising sharply it is because of geopolitics. The sharp spike in oil prices leading up to Gulf War 1 is a prime example. Geopolitical concerns were ratcheting oil prices to their record high near $147 in 2008 before the financial crisis hit and then oil prices plummeted to almost $32 in just 5 months. The collapse was unprecedented. Prior to that, the US invasion of Iraq known as Gulf War 2 in 2003 had helped spur oil prices higher. In 1998, oil prices hit their nadir just below $11. Today they sit $83 or 650% higher.

Today the geopolitics might be Russia. According to the EIA Russia is the world's third largest producer behind Saudi Arabia and the US and the second largest exporter behind Saudi Arabia. Russia is ranked 8th in terms of proven reserves. The west has been placing sanctions against Russia including a number of its oil companies and executives. Lower oil prices would hurt Russia economically given its dependence on exports. Russia exports roughly 70% of its production.

Is it worthwhile following and keeping in mind geopolitical conflicts that could have an impact on the price of oil? The simple answer is yes because not only could the conflicts have an impact on the price of oil they could at some also impact global markets. Oil, natural gas and pipelines are according to many at the center of a number of conflicts around the world. Control of oil and gas reserves or control of territory in order to build pipelines is at the heart of many of today's global conflicts. A summary of a few key ones follows:

• Afghanistan - The Central Asian Oil pipeline project (later the Trans-Afghanistan pipeline) was proposed by numerous US oil companies in the 1990's. Trouble was political and security instability helped put the project on "ice". In order to build the project, cooperation was required from the Taliban who were in charge of Afghanistan at the time. It was not forthcoming. Many believe the failure to be able to build the project was behind the invasion of Afghanistan in 2001 as a result of the 9/11 attacks. Not long after the Taliban were removed an agreement was signed with the new Afghanistan government. Continued wars have slowed the building of the project but it is still expected to be built by 2017. The pipeline would transport gas from the Caspian Sea through Turkmenistan, Afghanistan and Pakistan to the Indian Ocean. The project was needed as the only other pipelines from the Caspian Sea went through Russia and that was an unacceptable route to the predominantly US oil companies involved. Another pipeline known as the Peace Pipeline from Iran-Pakistan-India is currently being built but the US has put considerable pressure on Pakistan including the threat of sanctions to kill the project because of the US's dispute with Iran. Saudi Arabia has also made overtures to Pakistan to abandon the project because of its ongoing dispute with Iran.

• Syria/Iraq - The Iran-Iraq-Syria pipeline and the Qatar-Turkey pipeline are competing pipelines that would pass through Syria in order to provide gas to Europe as an alternative to the Nabucco Pipeline from Azerbaijan and to lessen Europe's reliance on Russian gas. Syria was favourable towards the pipeline from Iran but not Qatar. Syria rejected the Qatar pipeline given it was Russia's ally and Russia is the top supplier of gas to Europe. The US was against the pipeline from Iran because of its ongoing dispute with Iran over alleged building of nuclear weapons. Azerbaijan is an ally of Russia. There are many who believe that the war against Assad is to remove him in order to place a more favourable regime in Syria for the Qatar-Turkey pipeline. The Qatar-Turkey pipeline would also be favourable to the US. The war with Islamic State (IS) has some major oil implications. IS have seized the Syrian oil fields and have attempted to seize the Kirkuk oil fields in Northern Iraq.

• Israel/Gaza - In 2000, extensive gas reserves were discovered off the coast of Gaza. Agreements were signed between the Palestinian Authority and British Gas and a group of contractors controlled by a Lebanese family. The question is who has sovereignty over the gas fields. Israel claims the fields as a part of the Levantine Basin where other gas fields have been discovered. The Levantine fields extend from Gaza and north along the Israeli coast, the Lebanese coast and the Syrian coast. The death of Yasser Arafat, the election of the Hamas government and the downgrading of the Palestinian Authority has left development of the fields in limbo and Israel has consistently claimed sovereignty over the territory. According to all legal arguments, the gas reserves belong to Palestine and Gaza.

• East China Seas/South China Seas - Huge reserves of both oil and gas have been discovered in the East China Seas and the South China Seas. Ownership of the fields is the source of conflict between China, Japan, the Philippines and Vietnam. China claims the region as theirs. There has been a large naval buildup by the US in the region to protect Japan, the Philippines and Vietnam from what is being deemed Chinese aggression. US warships are in both the East China and South China Seas and down through a major choke point, the Straits of Malacca. Japan is also rebuilding their military. China continues to press its claims in the East China and South China Seas. There have been a number of close confrontations in the area.

• Ukraine - Ukraine is estimated to have natural gas reserves of 5.4 trillion cubic meters. Ukraine also has considerable potential reserves of shale gas largely in the Donetsk region where currently separatists are in control. Numerous disputes between Russia and Ukraine concerning gas have depended on who is in charge in Kiev. Ukraine is a key transit point to transport Russian gas to Europe. Europe is dependent on Russia for roughly 30% of its energy needs. Some countries such as Poland depend on Russian energy for 100% of their needs. Because of ongoing disputes between Russia and Ukraine including many over payments for gas there have been numerous instances of supply disruptions. Disputes have been almost yearly since the dissolution of the Soviet Union back in 1990.

• Canada - It may seem odd to include Canada but there are numerous competing claims to the Artic. Under international law, no country owns the North Pole and the region of the Arctic Ocean around it. Russia, Canada, Norway, Denmark (Greenland) and the US are limited legally to 200 nautical miles from their coasts. Beyond that, the waters are considered "high seas". Trouble is there are potentially huge reserves of oil and gas in the Arctic. All are making claims as to ownership. Russia, Canada and Norway in particular are claiming ownership of vast regions because of underlying continental shelves. In order to defend their claims Canada is sending Arctic patrol ships and building an army training centre in Resolute Bay. As well, they are refurbishing existing deep-water ports. There are real tensions in the Arctic although those tensions are not at the same level currently being seen in East China and South China Seas.

There are other disputes as well. Libya, Nigeria, Sudan, Thailand, Myanmar, Egypt, Yemen are other areas where there is civil war or potential flashpoints or energy choke points (i.e. - Egypt's Suez Canal). The world is energy-centric and the major western economies of the EU, US and Japan are dependent on a steady supply of energy given that all are major importers. The EU is the world's largest importer of oil followed by the US, China and Japan.

I am showing a weekly chart of oil dating from the major lows of 1998. Since 2011 oil has been forming what appears as a sideways trading pattern. Oil prices recently broke down under the uptrend line from the June 2012 lows. There is potential for oil prices to breakdown to major support near $80. If, however, this is a topping pattern a breakdown under $80 would be considered a major breakdown and could suggest that oil prices could fall as low $45. A drop of that magnitude would be devastating everywhere where numerous projects today need prices above $80.

If for whatever reason oil prices did collapse under $80 it might suggest that a global economic slowdown is intensifying. It would have a major negative impact on major exporters. Saudi Arabia would cut production in an attempt to hold prices up. A collapse of that magnitude could be destabilizing to a number of countries.

If, however, the pattern is a large consolidation pattern (a possible five point reversal) then this down wave could complete the pattern. Once the wave is completed, oil prices chould then return to the top of the channel. Major resistance is at $110 but a breakout above that level could suggest a move to $145/$150. A breakout to the upside could be suggestive of one or more of the major conflicts noted above is most likely intensifying. Some consider the dispute in the East China and South China Seas to be potentially the most dangerous. Yet the conflict flies largely under the radar. The energy element in all of these conflicts seems to fly largely under the radar. But the reality in the world today is that if there is a conflict between the great powers (US, Russia, China and the EU) energy and the need to control it may be the prime reason for the conflict in the first place.