How Mideast turmoil affects oil prices. Six questions answered
From the first spark of Middle East unrest in Tunisia in December until the violent suppression of protests in Libya in late February, the price of a barrel of crude oil rose from $88 a barrel to more than $100. Here’s a rundown on oil supply-price issues affecting the US.
2. Has oil production in those nations slowed as a result of protests or regime change? Is an oil shortage expected?
Little change has been detected so far, and analysts do not currently predict a shortage given ample global supplies. But that could change swiftly if political instability spreads farther, analysts say. Some Western oil companies evacuated personnel from Libya. Natural-gas exports to Italy were slightly reduced. Total oil production cuts due to the Libyan turmoil remain unclear, although production elsewhere in the region seems steady so far. Saudi Arabia, the most important supplier to the world, seemed politically stable at this writing.
Still, the US and other markets are vulnerable to a “worst-case scenario” if further upheaval disrupts vital tanker traffic through the Suez Canal or the Bab el-Mandeb Strait between the Arabian Peninsula and Africa. In such a case, prices well above $100 per barrel might be expected.
“These events have significant potential to impact petroleum supply, during and after any transition to a new government, because the nations undergoing turmoil contribute a meaningful share” of global oil supplies, writes Kevin Book, a senior analyst at ClearView Energy Partners, a Washington energy research firm.