Follow us:

Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

January 31, 2011 at 9:36 AM

The economic stakes in Egypt: Oil is only the beginning

Sunday night, as Asian markets wobbled because of the uprising in Egypt, it looked as if this was going to be a nasty day on Wall Street. So far that hasn’t happened. The uber narrative is that investors are still into “risk” and those animal spirits haven’t been scared off by the protests in Cairo — yet.

The big dog is oil, which not only powers modern societies but whose price will have a major bearing on the pace of recovery — or if the recovery continues. An Egypt that shut down the Suez Canal would immediately interfere with a major transit route for oil tankers; traveling around the Cape of Good Hope would add time and cost. Brent crude edged above $100 a barrel today even though Suez remained open. Another concern is contagion elsewhere in the Middle East, especially to Saudi Arabia (oil) and even Iraq (oil and American soldiers).

Other worries: Loss of business by U.S. and European companies that were necessarily close to the Mubarak regime, especially military contractors. And a stampede by investors out of developing markets. Oh, and if oil prices jumped, adding inflation, then Ben Bernanke’s QE2 might seem, ahem, ill-advised.

Many photos and stories coming out of Egypt are inspiring, but it’s difficult to see how this turns out well, at least in the long run. Radicalism is on the rise in the Middle East — not just because of U.S. military involvement in Iraq but dating to the Iranian Revolution of 1979. For years moderates, democrats and intellectuals have been murdered or intimidated into silence. America’s oil addiction has caused us to prop up the authoritarian likes of Mubarak and the House of Saud. The region is full of angry, poor, unemployed young men, the fodder of radicalization. And the failure to solve the Israeli-Palestinian conflict has further eroded American credibility as an even-handed force. This is one of the last places on earth we want to see further destabilization.

The Dow’s up right now. Enjoy it.

Today’s Econ Haiku:

There’s Boeing, Airbus,

And WTO’s rules.

Who’s irrelevant?

Comments | More in Energy, Global economy

COMMENTS

No personal attacks or insults, no hate speech, no profanity. Please keep the conversation civil and help us moderate this thread by reporting any abuse. See our Commenting FAQ.



The opinions expressed in reader comments are those of the author only, and do not reflect the opinions of The Seattle Times.


The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited seattletimes.com access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Activate Subscriber Account ►