Global Instability and Rising Oil Prices

Each day that passes it seems that filling up at the pump is becoming more painful. Many oil exporting countries are currently experiencing abnormally high instability ranging from the Caucus region all the way to Sub-Saharan Africa. Here is a quick rundown:

In the mid-1990’s the war between Armenia and Azerbaijan came to a tenuous end, but things are starting to heat up again. Most of the fuss is over the Nagorno-Karabakh enclave in Azerbaijan that is primarily made up of Armenians. Azerbaijan wants the territory back while Armenia feels the need to protect members of its ethnicity. The major players backing Armenia are Greece and Russia, while those backing Azerbaijan are Turkey, and from a military industrial perspective, Israel. To paraphrase one regional analyst, this is one of those regional things that could spin out control and start a third world war much like the Balkans incident that started the First World War. I doubt this will happen, but any conflict in the region could cause disruptions in the only major energy pipeline that serves Europe without traversing Russian territory.

Nigeria is once again suffering violence between Christians and Muslims in the central city of Jos. The Nigerian constitution requires a power sharing between members of the two faiths, but with the Muslim President currently in Saudi Arabia undergoing treatment for a heart condition without an accurate picture of his status things are getting tense. The Christian Vice President, Goodluck Jonathan, has been given ceremonial powers to act as President, but many Muslims view this suspiciously. Further complicating matters is the Movement for the Emancipation of the Niger Delta (MEND) has declared an end to a ceasefire agreement with the government. The Niger Delta is the region where Nigeria harvests most of its crude oil.

The regime of Hugo Chavez in Venezuela is once again under attack from pro-democracy forces protesting the excesses of the Bolivarian style government. Chavez has survived these tests before, but with a crumbling infrastructure it is possible that the power grid could fail in the near future. Currently, the opposition forces are not adequately coordinated, but if things get worse the government of Venezuela would be up for grabs. Chavez has used the nation’s oil money for populous spending all the while ignoring other issues. This could come to a head relatively soon.

I’ve been discussing the Iranian nuclear standoff for some time; however defensive movements by the US followed by threats from the Iranian regime are increasing. If this standoff comes to blows it wouldn’t be beyond reason to expect Iran to cause havoc in the Strait of Hormuz which could potentially cutoff much of the world’s oil supply. February is the month to watch Iran and it won't be pretty.

A lesser known problem exists in Angola. Recently the soccer team from Togo came under attack while traveling through the oil rich Angolan enclave of Cabinda. The group most likely responsible for the attack is the Front for the Liberation of the Enclave of Cabinda (FLEC) who has been supported by elements in the two Congo’s. This is very unlikely to get out of hand, but one never knows.

It may not seem like much separately, but taken together the crude oil supply that much of the developed world has come to rely on is trapped in regions wracked by instability in the best of times or fighting seemingly endless wars in the worst of times. Unfortunately, I don’t expect anything to improve any time soon.