February 28, 2011

This Weekend’s News: Oil, Food and the Unrest in the Middle East

Widespread political unrest continued in Libya over the
weekend, prompting President
and representatives at the United Nations in New York to weigh in. On
Saturday night, the United Nations Security Council voted
unanimously to impose sanctions against Libyan leader Colonel Muammar
el-Qaddafi and called for an international war crimes investigation into the
disturbing violence
that observers have said has been perpetrated by the Libyan

Widespread violence and instability in Libya seems to be
having a toll on the global oil market. While Libya’s oil production – at about
1.6 million barrels a day – is dwarfed by larger OPEC states such as Saudi
Arabia – which produces about 8.4 million barrels a day – the declining
production in Libya coupled with jittery investors brought oil prices above 100
dollars a barrel, closing
13 percent higher on Friday from the previous week

According to The Wall
Street Journal
on Sunday, “Some Libyan oil shipments were set to resume
Sunday, but the disruptions are likely to last despite that, and OPEC
has little choice but to rely primarily on Saudi Arabia to deliver new barrels
and put an end to dangerous oil-price swings
.” Indeed, Saudi Arabia moved
to quell fears by making good on a pledge to increase oil production, which it
did on Sunday, bringing the state’s
total oil production above 9 million barrels a day


“Efforts to devise a more coordinated effort by the
Organization of Petroleum Exporting Countries [OPEC] to plug the Libyan shortfall
have failed, as
key cartel members such as Iran balked
,” The Wall Street Journal reported. Iran currently holds the OPEC
presidency, which gives the Islamic state leverage over calls for OPEC states
to tap into their production capacity to produce more oil. According to the Journal, “Iran's OPEC governor, Muhammad
Ali Khatibi, said ‘there is no shortage in the market’ because OPEC was producing
more than demand for its crude prior the disruptions.” Meanwhile, widespread
disruptions continued to plague Libyan oil production. According to the same
report from The Wall Street Journal,
“The IEA estimated last week that anywhere between a third and half of Libya's
1.6 million barrels a day may be shut down.”

Elsewhere in the Middle East, unrest continued to mount as
more states saw their citizens agitating for political reform, including anti-corruption
efforts, access to basic services and better economic opportunities. The New York Times provided a useful
interactive feature on Sunday recounting
the protests and planned protest, from Bahrain and Egypt to Iran and Iraq

In Iraq, protests have turned violent as demonstrators
continued to pressure Baghdad for basic
services, including stable and reliable electricity
. Meanwhile on Saturday,
The New York Times reported that two
gunmen attacked Iraq’s largest oil refinery, shutting down production of
approximately 150,000 barrels of oil a day, potentially disrupting the supply
of heating oil and gasoline to millions of northern Iraqis. “‘This will create
a crisis,’ said the official, Abud al-Kadir Salih. ‘It
will affect consumers of fuel from factories to power plants, and people in
daily need. It will be very hard to cover the shortfall
,’” the Times reported.  

Finally, on Sunday, Fareed Zakaria’s Global Public Square had a segment that linked
the current instability in Libya with the global food crisis
. According to
Zakaria, food prices may turn out to have the greatest influence on global
events in 2011, pointing in particular to the role that food prices played in
the revolutions in Tunisia and Egypt (an issue Christine
explored in an earlier post
). “Globally, it’s already a 1/3 more expensive
to stay well fed than it was last year,” Zakaria said. And Libya’s impact on
the global oil market could make it even more expensive to feed oneself, as
fuel prices subsequently increase the cost of food that has to be moved from
farms to urban communities. “Now nobody expects governmental instability here
in the United States because it costs a few cents more to get a Big Mac,”
Zakaria quipped. “But if you live in a place like Egypt where four out of 10
citizens are said to live on less than 2 dollars a day, almost half of that
income – those 2 dollars – is spent on food. So a sharp, steep rise in what it
costs you to feed yourself and your family can be devastating.”

Food prices are clearly on the rise, and it is an issue that
the Natural Security blog will continue to cover as we learn more about how
food prices engage existing political, social and cultural grievances that
contribute to instability. Stay tuned for more.

This Week’s Events

Today, at 4:00 PM, The
Pew Project on National Security, Energy and Climate is holding an event on “Climate Change and Energy
Security: British and American Military Perspectives

On Tuesday at 10 AM,
American University is hosting an event on “Oil and Gas
in Africa: A Blessing or a Curse?
” Then at 11 AM over at the Rayburn
Capitol Office building, the Environmental and Energy Study Institute is
hosting an event on the energy
efficiency and renewable energy aspects
of the Obama administration’s FY
2012 budget request. 

On Wednesday at 12:30 PM, go to SAIS for a discussion on
"Renewable Energy in Developing
Countries: Meaningful GHG Emission Reductions or Just Another Con?

Thursday, starting at 10:00 AM, Energy Secretary Steven Chu
will be testifying before the House
Committee on Science, Space and Technology
on the Department of Energy’s
proposed FY 2012 Budget.

Finally, on Friday at 2:00 PM, George Washington
University’s Elliot School will be hosting a discussion on “Environmental
Cooperation in Northeast Asia: Challenges and Prospects