Monday, February 21, 2011

Oil Production By Country

Below is a chart of the top 30 oil producing countries.  The data varies considerably based on sources although this source seems to be most consistent (CIA The World Factbook).  Libya is fairly far down the ranking at 18 and so far oil disruptions appear to be relatively small.  Iran and Saudi Arabia are the big question marks though.  It will be very interesting to see over the next few days what if anything comes out of Iran.

The global revolution is moving so fast and government responses have been as illogical as their style of government.  No one really understands the Middle East and Iran plays a large role in destabilizing the area.  Saudi Arabia is now surrounded by protests which cannot be a positive for stability in that country.  One also has to wonder where Al Qaeda is right now.  What role will they play in shaping the future of the Middle East?  Will they attempt to overthrow a weakened government or fill a power vacuum?  Israel is possibly more isolated now than ever before.  Hezbollah has declared they are ready for a new war with Israel and the ability of the US to maneuver in the region has been weakened.

The future of the US and global economies right now are in the hands of the global revolution. If oil production is impacted in Iran and or Saudi Arabia the shock to the system will be massive.  Consumers already squeezed from rising food prices will spend any remaining discretionary income to heat their homes, fuel their cars.  Treasuries so far are failing to rise in the face of geopolitical risk which will only put greater pressure on the US economy (a 100 bp rise in yields equates to an additional $140 Trillion in interest expense annually).   There are so many moving parts right now all of which are intertwined.

It's quite possible the Fed injects greater levels of QE to offset any shocks.  They may be forced to do all they can to hold up asset prices but that very action will further weaken the USD and treasuries.  The Fed may have entered a negative feedback loop they cannot get out of unless they wish to finally confront the structural issues facing the US economy.

Watch Iran for signs of the 2009 revolution awakening.


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