January 31, 2011
A Chokepoint in Peril
Financial analysts who are watching the political unrest in Egypt are sending out assurances that two Middle East oil shipping routes – the Suez Canal and the SUMED Pipeline – are not expected to be affected.
But others are warning that if political upheaval continues and spills over into the rest of the region, it could endanger oil shipments out of OPEC nations. On any given day, more than two million barrels of oil move through the Suez Canal and the SUMED Pipeline.
Earlier today, CNBC was reporting that oil prices are climbing above $90 a barrel on news of the unrest. A report out of Reuters said that while oil prices crept upward, the leaders of OPEC nations were gathering to discuss increasing output.
In an early news report today, Reuters quoted Daniel Lacalle, a senior portfolio manager at Ecofin Ltd., saying that the “threat of contagion” among other oil exporting nations had most analysts worried. Those other nations listed by Lacalle are a laundry list of hot spots that keep American national security experts awake at night: Algeria, Bahrain, Iran, Iraq, Lebanon, Libya, Sudan, Syria and Tunisia, among others.
Not only does our addiction to Middle East oil mean we continue to send money to our enemies, but the inherent unrest in the Middle East threatens access to that oil, even when the unrest is in a state like Egypt, which is neither hostile to the U.S. or an oil-exporting nation.
We already know that Institute for Forensic Economics found that taxpayers pay $24 a barrel of oil to pay for military operations that go into protecting Middle East shipping routes, and that the military operations contribute heavily to carbon emissions and global climate change.
Now we are being reminded, again, that this failed policy of relying on foreign oil isn’t going to protect our fragile economy from potential shockwaves due to oil supply disruptions.
