August 29, 2013
Are you ready to pay four, five or possibly even six dollars for a gallon of gasoline? War has consequences, and a conflict with Syria has the potential to escalate wildly out of control very rapidly. The Obama administration is pledging that the upcoming attack on Syria will be “brief and limited” and that the steady flow of oil out of the Middle East will not be interrupted. But what happens if Syria strikes back? What happens if Syrian missiles start raining down on Tel Aviv? What happens if Hezbollah or Iran starts attacking U.S. or Israeli targets? Unless Syria, Hezbollah and Iran all stand down and refuse to fight back, we could very easily be looking at a major regional war in the Middle East, and that could cause the price of oil to explode higher. Syria is not a major oil producer, but approximately a third of all of the crude oil in the world is produced in the Middle East. If the Suez Canal or the Persian Gulf (or both) get shut down for an extended period of time, the consequences would be dramatic. The price of oil has already risen about 15% so far this summer, and war in the Middle East could potentially send it soaring into record territory.
Oil jumps to above $108 a barrel on Syrian crisis
BANGKOK — The price of oil jumped more than $2 on Tuesday, to above $108 a barrel, after the U.S. defense secretary said American forces were ready to act on any order by President Barack Obama to strike Syria.
By early afternoon in Europe, U.S. benchmark crude for October delivery was up $2.12 to $108.04 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 50 cents, or 0.5 percent, to close at $105.92 on Monday.
Egypt is a key bottleneck in the global oil industry. Should the current turmoil in the North African country get any worse, a potential oil spike could damage any nascent economic recovery.
After last week’s bloody crackdown by the Egyptian army, fears of a disruption of oil supplies to the West have boosted the oil price. Brent crude prices were propelled to a four-month high of $111.23 on Thursday. If the turmoil gets worse – or unrest spreads to other countries – the risk premium currently factored into the price of crude is likely to increase further.
Egypt is not a major energy exporter, producing a nominal amount of the world’s oil and gas. The North African country appears at number 54 on the list of the world’s largest oil exporters, producing about 0.9pc of the world’s oil and 1.8pc of global natural gas supply.
However, Egypt plays a vital role in international energy markets through the operation of the Suez Canal and the Suez-Mediterranean (Sumed) pipeline. These are vital pieces of infrastructure in the global oil market.
The Cradle of Mankind is a Great Rift valley that runs through Kenya, created by separating tectonic plates, and so named due to the million-year old human remains that have been discovered there. They are not the only things that have been discovered there; oil drillers claim that preliminary tests suggest a string of fields in the area that could transform the country into a major oil producer.
Last year Tullow Oil Plc., of the UK, and Africa Oil Corp., of Canada, discovered crude oil at two exploratory wells, and now plant to drill a further 11 during 2013. Tullow estimates that the valley could hold 10 billion barrels of oil, enough to supply Kenya for 300 years.
Africa’s oil industry has focussed on the West, with Nigeria producing the majority of the continents oil, and East Africa has remained overlooked. Afren Plc. Stated that of the more than 30,000 wells drilled in Africa, less than 500 have been in East Africa.
Keith Hill, the CEO of Africa Oil explained that, “there was a giant under-explored hole on the map. Now the world has woken up to East Africa. I’ve never seen a basin of this magnitude.”
This discovery will place Kenya at the centre of East Africa’s emerging oil industry, but Uganda is also about to begin drilling for oil, and Tullow and Africa Oil are already drilling in Ethiopa.
By. Charles Kennedy of Oilprice.com
- Sabissa’s oil exploration results in two weeks (ethiotribune.net)
- “No oil discovered” says Ethiopia and UK company (sudantribune.com)
- Ethiopia: A Potentially Golden Block on East Africa’s Tertiary Rift (ethiotribune.net)