Oil price drops as Mubarak steps down – will Saudi Arabia follow?

We are in for a period with very volatile oil prices as the Middle East enters the age of “people power”. It is quite unlikely that this wave of popular “revolt” will stop with Tunisia and Egypt. Yemen is already showing signs and Libya, Algeria, Morocco, Jordan and the Gulf States are all regimes with a potential for revolution. Saudi Arabia is the big one though for oil price.

But the events in Egypt with no clear political leader and with no retaliatory violence to deliberate provocation are both amazing and encouraging. There is a widespread political maturity that is quite fantastic after 30 years of authoritarian rule.

The Hindu reports:

Besides Egyptian President Hosni Mubarak’s stepping down, the rising dollar index and rally of U.S. stocks triggered oil selling and sent the price to a 10-week low. …

… Light, sweet crude for March delivery dropped 1.15 dollars to 85.58 dollars a barrel on the New York Mercantile Exchange, its lowest settlement since Nov. 30, 2010. The crude oil price went up and down following Egypt’s fears and joys. The commodity had experienced an approximately 6 percent price increase since the crisis began on Jan. 25. Much of that move pertained to the uncertainty surrounding the leadership of Egypt. Although Egypt is not a main oil producer, it controls the Suez Canal, which is an important transportation route for oil from the Middle East.


The short term consequences for oil price when (and it has to be “when” and not “if”) the Saudis finally dismantle the anachronistic regime they have cannot be predicted. But the long-term consequences will probably be a reduction of the base price.

The key is when. It is also amazing in this information and “spying” dominated world that the entire intelligence community had no inkling  of what was coming in Tunisia and Egypt. Information was probably available but clearly no one made the correct analysis or drew the right conclusions.

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