The Egyptian Revolution: What Next for Global Oil Supplies?

Introduction

Before the Egyptian revolution, I suggested that if successful, it could spawn similar uprisings in oil-exporting countries. So far, it appears to have been successful. And it has heartened groups fighting for democracy in other lands. And now, following uprisings there and in Tunisia, we hear of growing unrest in Algeria, Iran, Jordan, Libya, Morocco, Saudi Arabia, and Yemen. The situation has become so troubling that Obama dispatched his most senior military officer “to discuss the events in Egypt, convey best wishes from Obama and welcome Abdullah’s “recent reaffirmation of Jordan’s ambitious modernization agenda”.[1] That must have been an interesting discussion – like what was said about whether or not the US military would help or hinder an overthrow of the monarchy.

But all of this warrants another examination of where the wave of democracy might lead and its impact on global oil supplies.

The Wave of Democracy

Let us now look again at the major oil exporters and where further uprisings might occur. In Table 1, I list the 24 leading oil exporters[2] along with their freedom status as judged by Freedom House. Of those 24, I view only Russia, Canada, Norway, Mexico, and Argentina as likely to be free of any political disturbances moving forward. That leaves 82% of the oil exports of the countries listed at some risk. And unlike Egypt and Tunisia, major disturbances in any of these countries could cause an immediate spike in global oil prices.

Table 1. Democracy in Leading Oil Exporters

Freedom Oil
Country Status Exports*
Saudi Arabia Not Free 8,649
Russia Not Free 5,388
United Arab Emirates Not Free 2,507
Kuwait Partly Free 2,349
Venezuela Partly Free 2,182
Nigeria Partly Free 2,157
Iran Not Free 2,048
Norway Free 1,954
Algeria Not Free 1,877
Iraq Not Free 1,793
Libya Not Free 1,541
Angola Not Free 1,379
Kazakhstan Not Free 1,181
Canada Free 809
Qatar Not Free 753
Mexico Free 704
Oman Not Free 576
Azerbaijan Not Free 526
Equatorial Guinea Not Free 362
Sudan Not Free 292
Colombia Partly Free 277
Ecuador Partly Free 273
Argentina Free 262
Congo (Brazzaville ) Not Free 239

Source: Freedom House and the CIA Factbook.

*Energy data in thousands of barrels per day.

Oil Dependencies

What countries are at greatest risk if there is “an oil supply disruption”? Table 2 is relevant here. It lists the top 20 countries in terms of oil imports. It also indicates what percentage of global oil traded they import along with what percentage of domestic consumption comes from imports.

Table 2. – Oil Imports, Share of Oil Traded and Share of Domestic Consumption

Net Percent
Country Imports* Global Imports Domestic Consumption
United States 9,606 22.0% 51.4%
Japan 4,652 10.7% 106.6%
China 4,005 9.2% 48.8%
Germany 2,325 5.3% 95.4%
South Korea 2,167 5.0% 99.2%
India 2,161 5.0% 72.5%
France 1,788 4.1% 95.4%
Spain 1,497 3.4% 101.0%
Italy 1,324 3.0% 86.1%
Singapore 820 1.9% 93.4%
Netherlands 766 1.8% 83.0%
Belgium 686 1.6% 112.8%
Turkey 602 1.4% 103.8%
Indonesia 586 1.3% 52.6%
Taiwan 572 1.3% 62.8%
Thailand 564 1.3% 67.3%
Poland 489 1.1% 89.6%
Australia 405 0.9% 42.8%
Greece 368 0.8% 88.8%
South Africa 362 0.8% 62.5%

*Energy data in thousands of barrels per day.

I have written before about the delicate oil balance[3]. Political leaders of all countries will do whatever is needed to insure oil supplies for their citizens.

Investment Implications

Looking at Table 1, it is highly likely there will be one or more serious disruptions in the next 12 months causing an oil spike. In light of this, risk oriented investors should have some form of oil hedge in their portfolios.


[1] http://news.yahoo.com/s/ap/20110212/ap_on_re_us/us_us_mideast

[2] Energy in this and the following table come from the CIA Factbook. Most data are from 2008.

[3] Morss, Elliott R. (2008) “Global Energy: A Factual Framework for Future Research,” New

Global Studies: Vol. 2 : Iss. 1, Article 5 and http://www.morssglobalfinance.com/energy-the-frantic-global-search-for-more/.

The content above was saved on the old Morss Global Finance website, just in case anyone was looking for it (with the help of archive.org):
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