Much has been deservedly written on the oppression and economic deprivation of the lives of Middle Eastern people. When one thinks about the depths and scope of global poverty, we can look back and see that it was inevitable that a broad and bloody rebellion would take place. However, it is still shocking to see the speed of how oligarchies are crumbling all around the Middle East. The impact is being felt in energy as crude oil prices skyrocket with Nomura Holdings projecting a possible price of $220 per barrel. That is a mind-boggling figure that will have severe implications for the U.S. and global economy.
Crude oil is a key ingredient in providing various sources of energy. In addition to it being refined to make gasoline, it is also used for heating oil and diesel fuel. Right now, it is being traded between $96 and $108 per barrel which is already a high amount. That is one of the primary reasons why we are seeing a significant rise in gasoline and diesel fuel prices. Expect to see an even greater surge as the Middle East crisis expands.
The U.S. recovery will be tested during this crisis. As gas prices rise, consumers will find an increasing portion of their spending going toward transportation at the expense of other items. One can expect that the refinery and energy companies to increase their profitability, but it will be at the expense of other industries. In particular, firms most negatively impacted with be those that rely on large transporation costs in delivering products or utilize significant energy costs in producing their products. If this continues, then the brighter prospects for the U.S. will have to be dimmed.
The global economy will also be impacted by this. China, India, and Brazil have experienced explosive growth recently, but have been hampered by inflation risks. Rising crude oil prices will only exacerbate this issue as firms try to shift costs on to consumers. If not managed properly, then we could see their economies collapse and go into a deep recession. As for Europe, they are better positioned to handle this crisis because they have made significant investments in finding alternative energy sources. However, their significant debt burden can ill-afford events that will burden both consumers and businesses.
Typically, revolutions take years and even decades before stable governments emerge. Meanwhile, the worst part is the general uncertainty and increased political instability risks. As the fighting intensifies, the main concern is the potential damage done to oil fields. Once a victor is established then there is the question of the type of government formed. If it discourages private and foreign investment, then that will negatively impact the global economy. Given these unknowns, it typically leads to more pessimism within the business community and that is certainly an obstacle to creating jobs.
You wrote:
ReplyDeleteMiddle East Can Wreck Havoc...
The expression is "WREAK" Havoc. Not WRECK.
You wrote:
ReplyDeleteMuch has been deservedly written on the oppression and economic deprivation of the lives of Middle Eastern people.
North Africa is NOT the Middle East.
When one thinks about the depths and scope of global poverty, we can look back and see that it was inevitable that a broad and bloody rebellion would take place.
The shared ground is the latest uprisings is Islam. Because Islam is a religion/political doctrine/military all rolled into one, it creates its own form of misery and widespread debasement of humanity.
However, it is still shocking to see the speed of how oligarchies are crumbling all around the Middle East.
North Africa is NOT the Middle East.
The impact is being felt in energy as crude oil prices skyrocket with Nomura Holdings projecting a possible price of $220 per barrel.
Nomura is wrong. WTI is $98 a barrel. Brent crude is $112. Meanwhile, if Obama were not the lover of Islamic dictators that he is, simply empowering US oil companies to drill in all our domestic, resource-rich territory would take away much of the fear that can drive oil prices to near-term, short-term spikes.
That is a mind-boggling figure that will have severe implications for the U.S. and global economy.
Yeah, well in 2008, after oil hit $147 a barrel, it fell to $33.
Right now, it is being traded between $96 and $108 per barrel which is already a high amount.
Not a bargain. But nothing else on the planet contains as much energy in such a small space.
Expect to see an even greater surge as the Middle East crisis expands.
Meaningless statement. A one-day spike is painless. It's only if oil settles at substantially higher prices that we feel real economic pain. And given the spare production capacity in the world, sustained higher prices are unlikely. Moreover, Iraq may well become a major producer in the next couple of years.
One can expect that the refinery and energy companies to increase their profitability,
Refiners? Nonsense. They buy the expensive oil at high prices and must sell gasoline and other refined products in a murderously competitive market. They will see margins shrink.
In particular, firms most negatively impacted with be those that rely on large transporation costs in delivering products or utilize significant energy costs in producing their products.
No. The companies most hurt by higher oil prices will be airlines and trucking. Oil prices will also hit makers of plastics. A lot of industries will feel a pinch with oil at $100, But Obama could offset some of the pinch by encouraging an expansion of our domestic energy industry instead of jabbering about pie-in-the-sky solar and wind alternatives.
As for Europe, they are better positioned to handle this crisis because they have made significant investments in finding alternative energy sources.
ReplyDeleteUnless you are referring to the fact that France produces 80% of electricity from nuclear power, you are joking.
Typically, revolutions take years and even decades before stable governments emerge.
However, if these horrifying Islamic tyrannies become relatively democratic, like Turkey, for example, then all of them will get on the road to increased prosperity. But muslims dislike democracy because in the end, it offends their crazy god and his crazy prophet.
Meanwhile, the worst part is the general uncertainty and increased political instability risks.
As they say, capital goes where it's well treated.
As the fighting intensifies, the main concern is the potential damage done to oil fields.
Not really. The muslims never put enough capital into maintenance and repair and upgrading. Whatever damage these morons inflict can be easily undone.
Once a victor is established then there is the question of the type of government formed.
True, and muslims have a long history of making the wrong choices.
If it discourages private and foreign investment, then that will negatively impact the global economy.
That's muslims for you. Obsessed with destroying Israel, but mindless of the suffering and impoverishment their stupidity inflicts on themselves.
@ No_slappz, I just noticed your comments. My recommendation is that you use more tact in your criticisms. With your tone and spirit, I'm concerned that you are limiting your sphere of influence and won't maximize your potential.
ReplyDeleteAs for considering Libya and Tunisia as part of the Middle East, I do this due to their proximity and demographics.
While I'm inclined to agree with you about that crude oil prices will not go up to $220 a barrel, all bets are off if Saudi Arabia goes into turmoil. As of right now, most analysts believe King Abdullah will remain in control, so that might lead to more stability in the region. Also, Obama's recent change of course and opting for regime alteration, rather than regime change, might do the trick. We will see.
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