What started in Tunisia has now spread to Egypt, Bahrain, Libya and Yemen. Political unrest coupled with mass protests and demand for government reform is having a domino effect across the globe. If Saudi Arabia is next, oil prices could skyrocket. See the following article from International Living for more on this.
Is your television turned on?
Are you watching the protests in Bahrain, Libya and Yemen?
Have you seen where this all leads? And how it could bring the world economy to its knees in a matter of hours?
Let’s start at the beginning…
At about noon on December 17, in front of the governor’s house in a small town called Sidi Bouzid in Tunisia, a 26-year-old fruit vendor called Mohamed Bouazizi doused himself with paint thinner and set himself on fire. He was protesting for what he saw as harassment by the local police earlier that day.
Bouazizi’s gruesome gesture of defiance sparked off a popular uprising in this small North African state that led to the toppling of the president Zine el-Abidine Ben Ali.
He wasn’t the only Arab strongman to fall. This month, the revolution inspired by Bouazizi resulted in the departure of another unpopular leader – Egypt’s president Hosni Mubarak.
Just yesterday, the same popular movement led security forces in Bahrain to kill four protesters in the capital Manama. In Libya, the regime of Muammar al-Gaddafi killed 20 protesters in Libya’s “Day of Anger.” And in Yemen there was a fifth day of violent clashes yesterday.
Egypt is a critical transit corridor for the world’s oil supply. About two million barrels of crude oil pass the Suez Canal every day. And the country’s Sumed Pipeline carries about three million barrels of oil a day.
But Libya has the world’s tenth largest oil reserves – just behind Russia and Kazakhstan, but ahead of Nigeria, the U.S. and China.
Believe me, crude oil traders will be watching Libya closely over the coming days and weeks. But even Libya pales by comparison with the world’s true oil Goliath: Saudi Arabia.
Saudi Arabia is the world’s biggest crude oil reserves…by a long shot. And global oil prices depend on Saudi Arabia because the country has the only significant spare capacity that could meet any serious supply disruption.
Without this spare capacity buffer, any crimp in supply would send crude oil prices through the roof.
What’s happening in Bahrain is hugely important to what happens in Saudi Arabia. Bahrain’s Shiite majority is leading the protests there against the Sunni royals in charge. Sunni royals just like the Al Saud – the ruling royal family of Saudi Arabia.
It would be a disaster for the Al Saud if the Shiite protests in Bahrain, across the causeway that spans a narrow strip of the Persian Gulf, were to spread to Saudi Arabia.
There are already rumors that the Saudis have mobilized troops and equipment to put down the uprising in Bahrain.
It’s no wonder. Saudi Arabia’s Eastern Province is mostly Shiite…and it contains the lion’s share of the kingdom’s oil reserves.
The Eastern Province is home to state-run oil giant Saudi Aramco. And it holds the giant oil fields of Safaniya, Shaybah and Ghawar.
Western governments – and the oil market in general – are complacent about the prospects of Arab protests spreading to Saudi Arabia. They point out that the Saudi king is popular…that he has plenty of oil money to spread around…and that the Saudi population is docile and compliant.
Maybe.
But back in December nobody imagined that Tunisians would be able to oust their government…or that their rage would spread to Egypt and lead to the departure of one of America’s most stalwart allies in the region.
According to one Middle-East expert, Faysal Itani at consultants Exclusive Analysis, things are not as docile as presented in Saudi Arabia.
“There is very high unemployment, deeply-aggrieved minorities, and the army has been kept weak and divided for political reasons,” he told the Daily Telegraphnewspaper in Britain.
In 1979, the Shiites in the Eastern Province rose up in sympathy with the Iranian revolution…and the uprising that led Saudi forces to kill 21 protesters.
This time the backlash from the province could be much worse.
If we do see trouble spread to Saudi Arabia, oil prices WILL spike.
At $120 a barrel, crude oil prices would act as a major drag on growth. At $140+ a barrel – which crude oil traded for briefly in 2008 – it could choke off growth altogether.
This article was republished with permission by International Living.
