Oil Shock Is Coming
So—you’re paying 20 cents a gallon more for gas today than you were a week ago. And $1.70 per gallon more than you were just 26 months ago. Ouch.
Better get used to it.
Of the 89.1 million barrels of oil the world uses every day, about 35 percent come from—uh oh—North Africa and the Middle East. And as you’ve probably noticed, that isn’t the most stable place these days. With popular revolutions suddenly threatening and toppling governments all over that region, it’s an awkward time to be a filthy rich autocrat.
It’s also an awkward time for the world to be so crushingly dependent on oil.
That instability has put the uninterrupted production, refinement and shipment of our most vital commodity in serious jeopardy. As a result, the first two months of this year saw the price of oil leap about $20 a barrel. That translates into 50 cents more per gallon. That increase, if it lasted all year, would cost the world over $650 billion—more than 1 percent of global gross domestic product.
Just that 20-cent jump since last week has Americans paying over $75 million more per day to fill up than seven days ago. Anxiety over energy costs sent stocks tumbling yesterday; the Dow Jones lost a migraine-inducing 168 points in a single day.
The thing is, the tumult so far—affecting mostly Tunisia, Egypt and Libya—hasn’t yet deeply hurt oil supplies. Production has been cut in half within Libya, which supplies only 2 percent of the world’s oil; this past weekend, Iraq’s largest oil refinery was bombed. But most of the cost increase has been because of jitteriness over what might come.
The contagion of instability in the region threatens to affect more and bigger oil exporters. Oil importers are nervously watching Algeria, Kuwait, Oman, Iraq, Iran, Nigeria, United Arab Emirates, Bahrain, and most of all, Saudi Arabia. Even the danger of trouble in these countries threatening supplies spikes prices. An actual disruption would wreak havoc. The impact on oil prices—and the shock to the global system—is hard to overestimate.
Today’s oil markets are intricately tied together worldwide. “[B]ecause oil is traded globally, the spot price of the next barrel sold is based on minute-by-minute market prices,” explains msnbc’s John Schoen. “As supplies tighten, a barrel of oil is worth what the latest bidder is willing to pay for it. So no matter where the oil comes from, supply shocks ripple immediately though the global market.”
Given North Africa and Mideast volatility, analysts say $120-a-barrel oil for at least a few months is sickeningly plausible. Greater disruptions, and the price could shoot to $150 or more. And right now, there’s no light on the horizon. “From the straight point of view of oil price stability, things will never be as good again as they have been [before Middle Eastern and North African] governments started to wobble,” Carl Weinberg, an economist at High Frequency Economics in Valhalla, N.Y., told the Globe and Mail (emphasis mine).
It is estimated that a $1-per-barrel bump in oil prices adds almost 2½ cents to the cost of a gallon of gas. When fuel costs rise, everything rises: manufacturing for petroleum-based products, transportation, shipping, construction. And every extra dollar people and businesses have to spend on oil, they don’t spend on other things, which stifles growth. Estimates are that a $10 oil increase, in addition to adding 25 cents per gallon, chokes global economic growth by nearly half a percentage point.
Of course, with the world’s economic condition already pretty wobbly, the effects of surging oil costs are heightened. “When oil prices spiked three years ago, the economy was coming off a long period of prosperity and consumers felt relatively strong. This rise comes after three of the most challenging years in decades for the global economy,” wrote the Wall Street Journal—and that was last week, way back when gas was only $3.19.
Food prices are high and rising. Unemployment is soaring. Individual and government debt are at emergency levels; inflation and rising interest rates will only compound the problem. The U.S., Europe and Japan are all particularly at risk financially.
The unrest in North Africa and the Mideast invites us to look honestly at the startling vulnerabilities inherent in our modern energy-dependent world.
Demand continues to surge for a crucial commodity in finite supply.
The world’s most powerful countries are inescapably reliant on an unchanging status quo enduring within some of the world’s most unpredictable regimes.
Even modest disruptions in our fuel supplies would be devastating—and yet, frankly, they are inevitable.
The gyrations in the markets, the anxiety seizing nations all over the Earth because of the potential for oil shock, are early signs of an ugly emerging reality. Mushrooming global demand is about to collide spectacularly with volatile and inadequate supply.
The nations that need to import their energy will fall into one of two categories. On one side will be those that sputter and fail because of the energy crunch. On the other will be those that prosper because they aggressively move to secure their energy with whatever means necessary.
Looking at the impending oil crisis through the lens of biblical prophecy makes this unfolding scenario far more meaningful. Scripture speaks of an all-out world war seizing the globe in this end time, savage like nothing in history.
And it explicitly describes conditions—soon to become actuality—that without question spring from a violent, desperate war over the planet’s most precious resources, including energy wealth!
The average observer of this wave of revolution sweeping the oil-producing nations of North Africa and the Middle East cannot predict where or when it will stop, or what the landscape will look like when it is over. But scriptural prophecy supplies us with extraordinary insights, revealed in advance by the Creator God, who remains actively involved in shaping events to unfold according to His design just prior to the Second Coming!
Looking at the melee of that oil-rich region today, you can actually know which of these nations will turn radical, and who will align with whom. You can know which nations will languish and which will flourish amid the coming energy crunch. You can see in advance the battle lines of the coming resource war—which powers will be involved, who will fall and who will triumph!
