Mike Luckovich, perhaps the nation’s best political cartoonist, is concerned about oil prices given recent events in Egypt and Tunisia.
He’s not the only one – as I’m typing this, some commentator on Morning Joe is actually noting that oil prices have relatively evened out after an original rise last week (he's concluding that, measured in corporate profits, the business world is rolling with current events just fine). The mantra of most experts seems to be that we'll see only a slight hike driven by nervous speculators. CNN Money has posted a different take, indicating that things may smooth out in the short term, but political change in the region plus declining production in some countries mean that we're seeing the beginning of a new normal in higher petroleum prices. Forbes has done some of the top reporting on this as well, including highlighting that stocks for tankers originally rose with the unrest in Egypt before falling a few days later. In other words, all signs point to: no one really knows, but no one is really freaking out either.
A few days back Politico had the best piece to date on this, focusing not just on prices but on the fact that “Political unrest in a Middle Eastern country will inevitably lead to a new fight over oil in Washington.” My own take is that political cartoonists, some of the only commentators with no stake in the game, are often more insightful than experts. I recall many hardcore experts who've spent years to decades studying the country and the region saying after Tunisia that there was no way we'd see that country's revolution spreading, especially not to Egypt. I expect long term trends to be re-tightening in the oil markets; I also suspect that OPEC countries are concerned about the long-term effects, including the Washington effect that Politico points out, and have a serious stake in ensuring that prices don't rise to the point of making alternative fuels far more cost-competitive. My eyes will be on the Saudis and their reactions to events in Egypt for shaping my thinking on the oil part of the equation.
Food prices are another component of Egypt’s unrest that is starting to bubble up. I think it would be a major oversimplification to say that food prices played a determining role in this revolution – persistent oppression is more like it, and the poor functioning of Egypt's economy is a symptom, not an inevitable root cause. But with these kinds of events of history, reasons are often personal and defy easy aggregation. It’s in this "it's complicated" context that I contemplate to what degree rising food prices may have affected the opinions of some members of the Egyptian public. NPR and Wall Street Journal have alternate takes on the food factor that are worth a read.
On the flip side, natural security program alum, uber-analyst, and Catholic University lecturer Yasser El-Shimy suggested on the Best Defense blog that one way the United States could show a good face now is to provide three months of free wheat to the Egyptian people. I love that someone is thinking creatively about smart power tools for the U.S. government, and would love to see some specifics fleshed out (how to distribute, can we do it in a way that it won't negatively affect their market afterwards, etc.).
Finally, I’ll touch on a topic I’ve seen no analysis/speculation on: the region’s nuclear future. I attended a conference in Jordan last November focused on the MENA region's energy future, and one of the causes of hesitation for building nuclear reactors in the region as expressed to me by two Jordanians was: it makes for too nice of a target. There was serious concern that volatility in some countries tempers desires to invest in nuclear energy, and especially in processing fuel domestically.
If I were a betting gal, I'd say that the billions of dollars in nuclear energy investment in planning for Jordan and others will go forward regardless of any outside perception of instability. This is not because a "nuclear renaissance" in the region is the best path to boosting its energy security. Rather, it boils down to just how important the nuclear energy export race is to Japan, South Korea, France and others. Many countries have pegged important economic plans on exporting nuclear energy technology, and I expect them to calculate that if they hesitate on making these investments in the Middle East, their competitors will swoop in without hesitation.
This raises pertinent questions. Egypt has claimed that it will launch a major nuclear power program, but has refused to forego enrichment as the UAE did, for example. These projects are also extraordinarily capital intensive, and as we’ve seen this week, Egypt’s banks have seen assets being liquidated and its credit rating lowered. Even once it gets back on track, will nuclear energy be seen as attractive versus, for example, investing in renewable technology? These questions are important, but what's most important now is minimizing violence as the Mubarak regime ends, and the Egyptian people defining a new path for their country as soon as possible. And we'll keep an eye on these natural security questions over the long haul.