Upheaval in the Middle East is spreading and no one knows where it will stop. But everyone is clear about one thing; it will definitely spread into the rich industrialized world. It may stop somewhere in Europe because American continent is still out of reach. The turmoil in the Arab world is going to trigger worst-ever economic crisis for the world. And it is all about oil which, through still flows from Middle East, is getting dearer in the international market with worsening of crisis in North Africa and Arabian Peninsula. The focus of news after Egypt and Tunis is on Libya, Bahrain and Iran and by implication of Saudi Arabia. Libya is one of Africa’s largest holders of crude oil reserves, Algeria and Iran are major suppliers and Bahrain and Yemen both border Saudi Arabia on the peninsula that produces much of the world’s oil. Together, Libya, Algeria, Yemen, Bahrain and Iran represent about 10 percent of global oil production.
According to a report in The New York Times, oil markets are famously skittish, especially when there is even the possibility of disruptions in the Middle East and North Africa, which account for some 35 percent of the world’s oil production and a greater percentage of the world’s known reserves. That nervousness is likely to spread elsewhere, with so many economies still fragile in the wake of the worldwide economic downturn and with the possibility that higher crude prices could lead to further increases in food prices. The high cost of food has already led to unrest in several countries, even before political revolts began in the Middle East. The increased price of energy is a “burden that can be a detriment to the global economic recovery.
Brent is a global benchmark crude oil that is produced in the North Sea and traded in London. It is typically the benchmark that is used to set the price for most of the oil from the Middle East. Another benchmark crude, West Texas Intermediate, closed at $86.20 a barrel on Friday. Each benchmark has an impact on gasoline prices in the United States, with the East Coast more affected by the Brent prices than other regions. The reserves in the Middle East and North Africa (known as the MENA countries), while long important, have grown even more critical as demand for oil increases. Prices have risen about 30 percent since September, reaching their highest level since September 2008.
Those who track oil prices are especially worried about the renewed turmoil in Iran and the possibility of unrest spreading from Bahrain to Saudi Arabia, which could have a major impact on oil’s price and its availability. Richard H. Jones, the energy agency’s deputy executive director and a former American diplomat in the Middle East, said that about 17 million barrels of oil passed through the Persian Gulf and the Strait of Hormuz every day. “So if that shuts down, we’re in big trouble,” he said.
But so far, Mr. Jones said, the effects of the regional turmoil have been small. Egyptian production and transportation of natural gas have continued despite an explosion at a pipeline in the Sinai as the demonstrations against President Hosni Mubarak were under way. (An Egyptian investigator said four gunmen bombed the pipeline.) Although there have been labor protests among workers at the Suez Canal, so far analysts have said there is no danger of the vital waterway being affected by the country’s political upheaval.