Is it all about oil?

Date posted: October 3, 2013

World stock markets have been rocked in the last few months as unrest occurred in both Egypt and Syria. Whenever this happens we immediately think the reason is oil, that the world is worried something might happen to oil supplies as a result of fighting in the Mid-East. N.C. State University economist Mike Walden responds.

“Well, it’s certainly a big part of the problem, a big part of the issue. So yes, I would say you’re absolutely right. But what I would add, there’s another concern that’s specifically with Egypt.

“Actually, Egypt is a net oil importer, and that is the Suez Canal. People don’t think much any more about the Suez Canal, but the Suez Canal is still a very, very important part of world trade. Over $1 trillion dollars of cargo moves each year through the Suez Canal. That’s 10 percent of all world cargo.

“Now there are other ways to move cargo around the world, but they’re more costly. They’re less reliable in terms of weather. So I think another concern in this current crisis in the Middle East is, Could we have some shut down, partial shutdown or a full shutdown, of the Suez Canal?

“What would that do to the movement of world cargo? What would that do to the price of moving cargo? So I think this is also weighing in on the markets, and it is another reason to worry about political stability, particularly in Egypt.”

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