Egypt, And Its Ramifications On Global Oil Supplies.

Before the Egyptian revolution,I thought that if successful, it could spawn similar uprisings in oil-exporting countries.So far, it appears to have been successful. And it has heartened groups fighting for democracy in other lands. And now, following uprisings there and in Tunisia, we hear of growing unrest in Algeria, Iran, Jordan, Libya, Morocco, Saudi Arabia and Yemen.

The situation has become so troubling that Obama dispatched his most senior military officer "to discuss the events in Egypt, convey best wishes from Obama and welcome Abdullah's "recent reaffirmation of Jordan's ambitious modernization agenda". That must have been an interesting discussion -- like what was said about whether or not the US military would help or hinder an overthrow of the monarchy.

But all of this warrants another examination of where the wave of democracy might lead and its impact on global oil supplies.

The Wave of Democracy

Let us now look again at the major oil exporters and where further uprisings might occur. In Table 1, listed the 24 leading oil exportersalong with their freedom status as judged by Freedom House. Of those 24, I view only Russia, Canada, Norway, Mexico and Argentina as likely to be free of any political disturbances moving forward. That leaves 82% of the oil exports of the countries listed at some risk. And unlike Egypt and Tunisia, major disturbances in any of these countries could cause an immediate spike in global oil prices.

Oil Dependencies

What countries are at greatest risk if there is "an oil supply disruption"? Table 2 is relevant here. It lists the top 20 countries in terms of oil imports. It also indicates what percentage of global oil traded they import along with what percentage of domestic consumption comes from imports.

Political leaders of all countries will do whatever is needed to insure oil supplies for their citizens.

Investment Implications

Looking at Table 1, it is highly likely there will be one or more serious disruptions in the next 12 months causing a super oil-spike. In light of this, risk oriented imvestors should have some form of oil hedge in their portfolios.