Effect of Libyan-Egyptian War on Global Economy

Oil issues yet again surfaces over the global economy and is highly impacting its price. As the prices continue to escalate, the stability of the modest economic recovery after recession seems to be farsighted. The Egyptian Revolution in 2011, had a deep impact on oil markets, which launched the price of Brent Crude over $100/barrel. This high escalation in prices was seen for the first time since 2008. But, as per data and statistics Egypt in not a country, which is high producer of oil. Neither the Suez Canal nor the Suez-Mediterranean (Sumed) pipeline is essential for oil transit. Latest world news revealed that during the conflict of Egypt, tankers transiting the Suez Canal were barricaded and not allowed to import. With this pipeline averaging less than 1 million barrels per day, it surely affected the supply of oil and thus, the hike in prices. Also in 2010, the Sumed pipeline accounted for 1.15 million bpd of crude oil flows. After, shutting down of this pipeline affected both the sources, which provide approximately 6,60,000 barrels per day in global supply of 88 million barrels per day. Well the revolution surely affected the production of oil in Egypt but not the supply. While the Suez and Sumed canal were closed, oil tankers have to go through the Cape of Good Hope. This lengthening of journey resulted in adding time and cost to trips. Oil being an important element for running of companies and businesses also as personal uses seemed to face price hikes as countries have now to pay extra for procuring oil tankers. In world news today Libya, which was the first oil exporting nation to be engulfed in the political upheaval, sent further distress to oil markets. It is the 3rd largest exporter of African continent and 12th largest globally with 1.6 million bpd crude oil production. With Brent Crude barrels prices rising approximately $120, the global meltdown in economy is probable to continue increasing as the instability persists. Energy companies in Libya are facing bigger challenges with this price hike and cutting down of employees has been seen. The production work has been put on halt till the issue summarizes to a decision. Death of Muammar Gaddafi in the 2011 conflict relieved this issue as threat was on sabotaging of wells by Gadaffi’s loyalists. If oil shipments has been then seized it surely had caused further market disruption. While the effects of the uprisings in world news are now beginning to affect globally, more improvisation is needed to cope out with oil issues and look upon other growth factors.