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T & L COMMENT * Middle Eastern: Instability threatens more than Suez Canal
The impact of political instability on the oil price
(Video from YouTube, by direkirol -5 Dic 2008: Crosssing the Suez Canal with the Egyptian Army)
London,UK -Transport Intelligence, by Thomas Cullen -4 Feb 2011: -- With the Egyptian army now stationed on the Suez Canal the chances of a major interruption to shipping caused by the political instability in the Middle-East appear low, at least in the short term. What is more concerning for the logistics sector is the impact of political instability on the oil price... Both the OPEC nations and the International Energy Agency (IEA) have been hurriedly assuring the world that the supply routes for Middle Eastern oil are not in any danger. They point out that even if the canal and the pipeline running parallel to it were closed oil could be re-routed to Europe via the Cape. Nor would it have any effect on supplies to Asia Pacific or the rest of the world. The problem with such assurances is that they do not deal with the larger question of political instability spreading to major oil producers in the region... The implications of all this for the logistics market are two-fold. Although many logistics service providers now apply a fuel surcharge, the effects of higher oil prices will depress both demand and profit margins. It will affect both the types of transport that shippers select - with airfreight in particular very vulnerable - as well as how shippers move goods, with greater emphasis on slower movement of larger batch quantities... Even more concerning are the implications for economic growth in general and world trade in particular. As the economist Nouriel Roubini has pointed out, oil price spike are key triggers for recessions, exemplified by those of the early 1970s, early 1980s and early 1990s. More concerning still is the tendency for 'stagflation', with oil price increases combining with tight conditions in other areas of commodities and the overheating economies of China and India... Therefore the possibility exists that there may be a sharp reversal in the good conditions seen in the logistics markets over the past 12 months - indeed the reversal might even be as sharp as that seen during the recession of 2009...
posted by Unknown @ 6:42 AM
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