The Impact of Egypt's Political Crisis on US Oil Prices

I visited Cairo in March of 2008, and during my discussions with cab drivers and other Egyptians I came in to contact with, I sensed the frustration of the public at large with the government. Average citizens told me that they were lucky to make US $2 per day, and that was not enough to support their families. In retrospect, these conversations seem relatively mundane, but at the time, I was surprised at what unrest really existed in Egypt .

Now that the world has witnessed the uprising of the people of Egypt (and the subsequent resignation of Mubarak), people are no doubt wondering what the impact will be on the world political scene, as well as on commodities that come from and travel through the Middle East.

By the end of January 2011, most world markets had fallen a little bit, in response to the turmoil in Egypt and the Middle East as a whole. Shares fell 4.3% in Dubai , and Japan 's Nikkei fell 1.5%. Even the US 's Dow Jones suffered, with a loss of 166 points. While these numbers weren't record-breaking, the small impact on most global markets shows the intricacies and codependency that countries have on each other.

In addition to the impact on world markets, crude oil prices went up. In between 1/28/11 and 2/4/11, both the US 's and Egypt 's price per barrel of crude oil went up over $3. On January 31^st, the US price for a barrel of crude hit $92.19, the highest since October of 2008. The price then dropped in the US about $1 per barrel in the week following. The price per barrel went up by about $.40 in Egypt .

According to senior Middle East analyst Sameul Ciszuk, there should be little future impact on global oil and gas supplies, mostly because the Suez Canal and Sumed Pipeline have been secured by the Egyptian army. Even if the Suez Canal closed, tankers would still be able to supply oil to the rest of the world by going around Africa . Prices would therefore increase, but oil supply would not be completely cut off.

Though uncertainty still remains, the world markets as well as worldwide crude prices do seem to be settling down as Egypt's political system settles down, and it appears as though outrageous oil prices may be staved off... for now.

Resources:

http://www.chron.com/disp/story.mpl/business/7405401.html

http://www.bizjournals.com/houston/news/2011/02/01/analyst-sees-little-egypt-oil-and-gas.html

http://www.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm

http://www.eurasiareview.com/analysis/the-crisis-in-egypt-and-its-impact-on-the-oil-market-05022011/