Egyptian crisis, broader uprising could hit US energy imports

31 January 2011 19:33  [Source: ICIS news]

WASHINGTON (ICIS)--The uprisings that toppled the Tunisian government and threaten Egypt's could have an impact on US oil and natural gas imports if the turmoil spreads to other energy-exporting nations, analysts said on Monday .

While the world watches to see if Egyptian president Hosni Mubarak will lose his 30-year grip on power, the rulers of other Arab countries are said to be increasingly anxious that the “contagion” of popular unrest could undermine their regimes as well.

The turmoil in Egypt “can’t be good for us on many fronts, including energy”, said Frank Maisano, an energy analyst with the Washington, DC, law firm of Bracewell & Giuliani.

“Two major concerns seem to be access to the Suez Canal - which, if blocked, adds about 6,000 miles to petroleum’s journey - and the potential for the unrest to spread to other countries that export a lot more petroleum” to the US and Europe, Maisano said.

Any significant interruption for US imports of oil from the Middle East would have an immediate impact on US retail prices for gasoline, he said, noting that current gasoline prices across the country are “already well higher than normal at this time of year”.

US imports of natural gas, in the form of ocean-going shipments of liquefied natural gas (LNG), also could be affected if the unrest in Egypt should bubble up elsewhere in the region.

The US imports about 5bn cubic feet (bcf) of LNG from Egypt each month, according to the US Department of Energy (DOE).

Yemen, which also is beset by popular unrest and could see its government falter, exports about 6 bcf/month of LNG to the US. Qatar is the source of about 8 bcf/month of LNG shipped to the US.

But oil and its consistent supply to the US are the real concerns, according to analysts.

Although Egypt exports only about 600,000 bbl/month of crude to the US, it also controls the Suez Canal, through which huge supplies of crude and refined product pass each month en route to markets in the EU, the US and elsewhere.

Kevin Book, managing director of ClearView Energy Partners, said that the key question from the Egypt crisis is not overall supply but throughput via the Suez Canal.

He said that some 18m bbl/month of crude and 36m bbl/month of refined products get to market via the canal.

But even if the canal was shut down for a short period of time, “commercial inventories and government strategic reserves in the 26 IEA nations could compensate for lost volumes”, Book said, referring to the industrialised countries of Europe, North America and Asia that make up the International Energy Agency.

However, any disruption to world oil supplies almost certainly would be reflected in global crude prices and consequently US retail gasoline prices.

Book also suggested that an escalating crisis in Egypt and the broader Middle East could provide an environment for “opportunistic action” by some oil-producing sovereigns, particularly Iran and Venezuela, to escalate prices or advance their policy goals.

The US imports about 35m bbl/month of crude from Saudi Arabia, its principal supplier in the Middle East.  Another 5m bbl/month of oil comes via the Suez Canal from Kuwait, along with 10m bbls/month from Iraq. 

The US imports about 15m bbl/month of crude from Algeria.  While that supply does not transit through the Suez Canal, Algeria itself might be vulnerable to the sort of turmoil that rocked established power in neighbouring Tunisia.

Pollster Rasmussen Reports said on Monday that 75% of Americans think that the unrest in Egypt would spread to other Middle Eastern countries - and 60% of those polled said that such a migrating crisis would likely be bad for US interests.

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