Wednesday, 2 February 2011

How events in Egypt affect oil prices

With oil reaching $100 a barrel, the Independent's Hamish McRea considers how events in Tunisia and Egypt will affect the demand for oil.

"Though neither Tunisia nor Egypt are significant oil producers themselves, they have set in motion concerns about wider regional instability – and that in turn should remind us that the world is tremendously dependent on the Middle East and will almost certainly become more so over the next couple of decades."

The reason?

"Non-Opec oil is difficult oil: it is under the sea or in the Arctic, or bound up in tar sands from which it has to be separated. By contrast, Opec oil just comes straight out of the ground. In any case, even if the technical difficulties can be overcome, the actual ability of non-Opec producers to carry on ramping up production is in question. As a result Opec, producing less than 40 per cent of the total now, will be producing nearly half the world's oil in 2030, and most of that increase will come from the Middle East".

(Pic: Tahrir square, photo credit: BBC News Online)

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