logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

North African Conflicts That Could Drive Oil Prices Further Up

By  +Follow July 29, 2013 10:13AM
Share:

It has been almost three years since a Tunisian street-vendor set himself on fire in a desperate protest against the corruption and brutality of his country’s political system. The speed with which this event led to the pathetic abdication of Tunisia’s nearly three-decade old dictatorship shocked and energized the many oppressed peoples of the Middle East and the world.

Mohammed Bouazizi’s martyrdom might go down as one of the most effective acts of resistance against dictatorial rule that history has ever seen, as many of the region’s depots that seemed so lamentably permanent disappeared as if overnight, or at least faced challenges that were previously unthinkable. And while the “Arab Spring” that followed in the wake of that original event did not translate instantly into the implementation of democratic governance, there can be no doubt that the region’s power structure has been irreversibly changed.

Unfortunately, the unrest that resulted from the original Arab Spring protests has in certain instances transformed into devastating civil war, such as can be seen in Syria, or other forms of chaos and instability such as in Libya and Egypt. Given the centrality of energy resources in the region’s politics and economy, investors have been concerned about the prospect of these various conflicts driving up the price of oil, especially recently with crude at $107 per barrel.

With this in mind, the following is a list of North African countries in which unrest or violence has been or could be a potential reason for rising crude prices:

Egypt- Since the removal of President Hosni Mubarak, who ruled the country from 1981 to 2011, Egypt’s “revolution” has taken a number of iterations, most recently with the country’s powerful army stepping in to remove the democratically elected government of Mohammed Morsi, with many fearing that this move will polarize Egypt even further. The country is not a significant producer of oil though it does produce some natural gas, however Egypt has controlled the Suez Canal, a key shipping route that facilitates the transport of some 8 percent of the world’s oil and gas, since the 1950’s, and the country’s political travails have emboldened Islamist groups, particularly in the Sinai peninsula which sits along the waterway, and buts up against the extremely sensitive border with Israel.

Libya- Libya’s oil industry was put on hold for the year or so that it took for the country’s rebel forces, backed by Western air power, to depose Muammar Ghaddafi. Since then, however, the central government has been under increasing pressure from Islamist militias who fought in the revolution but have yet to be disarmed or incorporated into the state structure. All of this has put pressure on oil production. Libya is the world’s 17th largest oil producer, but there is greater fear about the potential of the recent empowerment of Islamist groups to spread into other parts of the region, whether further east, towards Egypt, or further south towards the Sahara-Sahel countries. This has already been seen in Mali, where Islamists took over more than half of the country’s territory prompting an intervention led, ostensibly, by French forces.

Algeria- Not often spoken of as a top oil-producing country, Algeria is nonetheless the world’s 15th largest producer of oil. The country, which sits of Libya’s Western border, has seen some spillover from the rise of Libya’s militias. This past January, militants seized a gas plant in the east of the country in Amenas, leading to a shoot-out with the military that resulted in the death of more than 30 foreign workers. Algeria’s government fought a brutal and bloody war with Islamists throughout the 1990’s, and was until recently considered the victor in that contest (at a cost of some 150,000 lives). Recent events could very well affect the stability that has been maintained over the last decade since the civil war ended.

Sudan/South Sudan- Sudan does not produce quite as much oil as the countries listed above, however its production coupled with its geopolitical position, make the country a potential. After many years of civil war, the nation was split into its northern half, now called Sudan, and its southern half, South Sudan, currently the world’s youngest country. Hostilities between the two Sudans did not conclude with the secession of the south, however, as both sides are beset by a rather difficult problem, being that while South Sudan has all of the oil, its northern neighbor has all the infrastructure needed to ship it to the rest of the world. Just last Friday, the government of Sudan threatened to cut off exports from the south, after accusing the government of South Sudan of arming and backing rebel groups within its territory.

Nigeria- The country is the world’s tenth largest oil producer, and could move up on the list if newly discovered reserves are brought to fruition. However, recent violence by Islamist groups, particularly against the country’s Christian communities has been a major and growing problem. Furthermore, the government has been seeking to take greater ownership of its own resources, which has led to the departure of companies such as Chevron (CVX) .

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

By  +Follow July 29, 2013 10:13AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.