The Politics of Oil

Despite the warm winter and oil inventories being abnormally high, geopolitics still rule the day. After Friday’s explosion in Saudi Arabia that was intended to disrupt oil production, oil is up again on geopolitical concerns. Al Qaeda has sworn to harm the kindgdom’s oil infrastructure.

It just so happens that most of the places we buy our oil from are unstable.

# Nigeria, Africa’s leading oil exporter and the U.S.’s fifth-largest supplier, just had a militant group claim that it wanted to take out 30% of its oil production. This week the militants’ attack on a pipeline switching station caused Shell to halt 455,000 barrels of oil a day. The militants want two of their leaders released from jail and greater oil revenues, and they vow to disrupt oil flow until they get what they want.

# Iran, the No. 2 producer in OPEC, recently balked at talks with Russia over a deal to accept enriched uranium from the former Soviet Union. It says it will continue with its nuclear program despite the threat of sanctions. The country sits on the strategic Straits of Hormuz, through which 40% of the world’s oil passes each week.

# Venezuela, despite importing 60% of its oil to the U.S., has stated that it would like to see the day when oil from the quasi-communist government goes to places other than the U.S.

Notice a trend? That’s without even throwing in Algeria, Indonesia, Libya and Russia.

The Street