The Crude World of Middle East Oilhttp://www.fool.com/investing/general/2012/09/16/the-crude-world-of-middle-east-oil.aspx David Lee Smith
September 16, 2012
I really didn't think this would become a series. Through the years, I've written a number of Motley Fool articles dealing with the shaky politics prevailing in the world's oil-producing countries. For whatever unfathomable reason, crude generally wasn't deposited in ultimately tranquil locations.
And so, as August concluded, I described to Fools the multifaceted dangers involved in the year-and-a-half-long attempt by rebels to overthrow the Assad regime in Syria. That description was followed by a piece last Wednesday on the myriad of generally unrealized -- today's crack media establishment has its attention trained elsewhere -- booby-traps lurking in post-war Iraq. Now, as you can imagine, my sights are trained on the likely fallout from the goings-on in Libya and Egypt.
There almost certainly will be other analyses sent your way, probably sooner rather than later. And hopefully the lesson you'll carry away is the realization that your portfolio simply can't be devoid of energy-related stocks these days.
Too much for granted
We've even come to think that we're on the verge of energy independence. Don't believe that for a minute -- not with the steady stream of federal regulations being promulgated to rein in domestic fossil-fuels production. Also affecting this fairy tale is the reality that crude is a fungible, globally transportable commodity. So eruptions in the Arab world -- including Persian Iran -- could have a profound effect on our own supply-demand circumstances. Indeed, as Oil & Gas Journal pointed out in a January retrospective on 2011's so-called Arab Spring, "The Arab world holds 49.6% of the world's proved oil reserves and 29.1% of natural gas."
I think it's a majority
Let's take a brief look at the potential fallout from this week's atrocities in Egypt and Libya. From a 20,000-foot perspective, both countries are in dire need of outside investment to bolster their energy industries.
Are the pharaohs getting frazzled?
Mohamed Morsi was elected to the country's presidency in June. Before that, he'd been chairman of the nascent Freedom and Justice Party, an offshoot of the questionable -- there are other, stronger adjectives that might be employed here -- Muslim Brotherhood, one of whose leaders has called for a jihad on Israel. While he's still a newbie as a replacement for the country's deposed dictator, Hosni Mubarak, as Eric Trager of the Washington Institute for Near East Policy detailed, perhaps presciently, in The Wall Street Journal last week, his early moves, edicts, firings, and appointments have done little to demonstrate a reverence for democracy.
For now, with its 2010 oil production having averaged only 675,000 barrels a day -- or far less than Texas -- Egypt's primary role in energy involves its spot as the region's third-largest holder of gas reserves, along with its position as operator of the Suez Canal, the SUMED pipeline, and 10 refineries. Oil transport through the canal has dwindled to about 1% of global crude supply and 5% of the seaborne oil trade, although the LNG that passes throu