As tension boils in the Middle East, oil prices are surging once again…
Over the past four weeks, crude oil has risen to $107 a barrel over global supply concerns involving Iran, Israel and the western world.
As The Australian reports, “The threat of an Israeli attack on Iran’s nuclear facilities has pushed world oil prices up by 15% in the past month and raised fears that… once again spell global economic havoc.”
Energy investors are understandably nervous. The Middle East is the world’s top oil-producing region, as well as the region with the world’s largest oil reserves. Iran accounts for 9% of the oil produced in the world. And today, it’s facing increasing pressure to end its nuclear program, or else.
“President Barack Obama,” MSNBC states, “said Sunday the United States will not hesitate to attack Iran with military force to prevent it from acquiring a nuclear weapon…”
One thing’s for certain, none of this news is going to help bring down oil prices anytime soon.
Yet, despite so much tension in the Middle East, there’s still hope for the future…
Another Dictator Down
Last week in Yemen, after 33 years as the nation’s autocratic ruler, President Ali Abdullah Saleh stepped down from power.
The transition, overseen by the Gulf Cooperation Council (GCC), makes Yemen just the fourth country in the Middle East to get rid of its dictator since the Arab Spring uprising began in late 2010.
And for Yemen, it signifies an opportunity for new beginnings… Well, hopefully it does.
Yemen’s new leader, Abed Rabbo Mansour Hadi, is already talking about some much-needed reforms. But he was also the former Vice President of Yemen when Saleh was President. So, right now, no one is sure how genuine Hadi is.
After all, he was elected president in a one-man race, even if Saleh and opposing parties did agree on him as a successor. And Hadi has already received approval from the Unites States and its allies.
In fact, according to Washington Post columnist David Ignatius, as an ex-military officer Hadi “understood that the corrupt Yemeni system needed reform. He has promised to hold a referendum within 18 months on a new constitution.”
That’s not all either… Hadi has also promised for real democratic elections by 2014. Not to mention, the United States is also insisting him to reform military pay. As David Ignatius writes, “In Yemen, the military is corrupted because soldiers are paid through their division commanders, who skim money and undermine morals.”
Whether or not Hadi will follow through on all of his promises has yet to unfold. But Yemen could be on the verge of a new energy era that ushers in some much needed prosperity and unity.
Yemen’s Outlook
As it stands today, Yemen is one of the poorest countries in the Middle East. Yet, as the U.S. Energy Information Administration (EIA) says, is strategically located “at the tip of the Arabian Peninsula on the Bab el-Mandeb, one of the world’s most important shipping lanes.”
Last year, Yemen’s oil production rates sank another 34% to just around 170,000 barrels per day. Yemen is the ninth-largest oil producer in the Middle East. But as you can see, rates have been falling for many years now.
Yet, a newly formed government just may help Yemen produce 500,000 barrels of oil per day, or more.
In fact, Iraq is just one example of a country where oil production has steadily risen since reforming its government. According to International Business Times, Iraqi oil production is expected to hit a 30-year high in 2012.
Yet there’s no doubt major challenges are up ahead for Yemen.
Al Qaeda is another big hurdle. In 2011, the EIA said anti-government strikes were the main reason Yemen was under the 200,000-barrels-per-day mark in terms of oil production.
But despite all the drab news, Yemen is proof that radical reform is still sweeping across the Middle East region. And it’ll be very interesting to see how soon it is before foreign investment comes pouring in.
Good Investing,
Mike Kapsch
Article by Investment U
