Oil Prices Skyrocketing in Wake of Egypt Protests
Saturday, February 5th, 2011
According to aggregated information of AAA, Wright Express, and the Oil Price Information service, the price of gas has climbed 2.4 cents since last week. Analysts predict that gas prices will increase by as much as 8 cents over the next two weeks. These findings reflect investors concerns over the instability in Egypt and the Middle East.
Taking broader look at the U.S. oil market, gas inventories are at an 18-year high. Crude oil imports have increased to 9.1 million barrels per day in the past month. This is 641,000 more barrels imported in the same period that 2009.
Despite this, the January storms have impacted the transportation industry heavily. As energy analyst Jim Ritterbusch notes in a recent Baltimore Sun article, the energy industry is a market that is especially “subject to the vagaries of geopolitics.” Thus, the uncertainty over the situation in the Middle East casts a shadow over the future of the oil market. Volatility in the oil market has made traders wearier of investing capital in this industry.
As stated in the same article, Egypt plays a moderate role in the oil markets controlling both the Suez Canal and a nearby pipeline, which carry close to 2 million barrels per day that are exported to European and American consumers. Their share of the world oil market is only roughly 2 percent; however, consumers are concerned with the protests spreading to other OPEC countries disrupting supply levels.
A Bloomberg article cites Faith Birol of the International Energy agency stating that the surge in oil prices to over $100 per barrel is high enough to “derail” the strides made in the global economic recovery. Globally, countries are putting pressure on OPEC to increase its exports in order to drive prices down. OPEC is due to meet on June 2, 2011 to review its daily quota, and in the nearer term, many of OPEC ministers will gather in Riyadh, Saudi Arabia on February 22, 2011 at the International Energy Forum. The results of these meetings will in large part determine the stability or volatility of the oil market.
Article by Andrew Timm
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
Tags: egypt , gas prices , middle east , oil prices , opec
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