Oil Price Spikes as Tensions in Libya Heat Up
Tunisia? Nah, not so much. Egypt? Meh. Bahrain? Almost. It took Libya to really get a rise out of the markets.
Or a fall, depending on what asset class you’re looking at today.
Only Libya ranks high enough on the list of the world’s top oil exporters to register a reaction. The CIA Factbook ranks the desert nation No. 15 in exports:
Bahrain, by contrast, ranks No. 49. But sitting, as it does, close to Iran, the island nation gets a few extra brownie points for strategic importance.
Shell, BP and Marathon are but a few of the international oil companies pulling their workers out of Libya and shutting down operations. ExxonMobil, ConocoPhillips and Occidental haven’t said much more than “no comment.”
As a direct consequence, the price for a barrel of the black goo has reached a level last seen before the panic spike in 2008. Brent crude is up more than $1.50, to $107.33. West Texas Intermediate is up over $7, to $93.33.
Other headlines from the region aren’t helping. Iranian warships are passing through the Suez Canal, something the Israelis call a “provocation.” And Somali pirates have killed four Americans aboard a yacht hijacked Friday off the coast of Oman.
But the Libya story is more than that of a major oil exporter shutting down. It was one thing for Tunisians to rebel against a government with a weak army…or for Egyptians to rebel when the army largely refused to shoot at them.
But it’s another thing altogether when Col. Gaddafi sends in warplanes to strafe crowds of Libyan protesters…and the protesters keep showing up.
Neither has it been a cakewalk in Bahrain. If you’ve got the stomach for it, there are a number of disturbing videos posted on YouTube detailing the level of violence being unleashed by the respective governments on their own citizens.
“Back in the 1990s, I spent time a fair amount of time in Bahrain,” said Outstanding Investments’Byron King in his essay “Investing Around the Chaos in the Arab World.” “Bahrain is about 70% Shiite and 30% Sunni. The Sunnis run the government, industry, business, banking, commerce. The Shiites are consigned to the other side of the camel tracks.
“I recall driving around Bahrain and encountering these surly-looking groups of underemployed young men — mostly Shiites — who were locked out of the economy. Nothing to do but smoke cigarettes, make a few dinar in the underground economy… and nurse grudges against the guys on top.
“It struck me even then that Bahrain was a pot that would boil over, sooner or later.”
We’re just about there.