3-3-2011 The 2011 Oil Shock More of a threat to the world economy than investors seem to think Mar 3

3-3-2011 The 2011 Oil Shock More of a threat to the world economy than investors seem to think Mar 3

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Unformatted text preview: The 2011 Oil Shock More of a threat to the world economy than investors seem to think Mar 3rd 2011 THE price of oil has had an unnerving ability to blow up the world economy, and the Middle East has often provided the spark. The Arab oil embargo of 1973, the Iranian revolution in 1978-79 and Saddam Hussein’s invasion of Kuwait in 1990 are all painful reminders of how the region’s combustible mix of geopolitics and geology can wreak havoc. With protests cascading across Arabia, is the world in for another oil shock? There are good reasons to worry. The Middle East and North Africa produce more than one-third of the world’s oil. Libya’s turmoil shows that a revolution can quickly disrupt oil supply. The spread of unrest across the region threatens wider disruption. The markets’ reaction has been surprisingly modest. The price of Brent crude jumped 15% as Libya’s violence flared up, reaching $120 a barrel on February 24th. But the promise of more production from Saudi Arabia pushed the price down again. It was $116 on March 2nd—20% higher than the beginning of the year, but well below the peaks of 2008. Most economists are sanguine: global growth might beginning of the year, but well below the peaks of 2008....
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This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.

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