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Mohamed Morsi, Egypt and Oil Prices

After my trip back from Egypt a couple of months ago, I played you my interview with a former Egyptian Air Force Officer.

In it, we discussed the future of Egypt in the short term. It wasn’t good. In fact, what I saw on the ground prompted me to make the observation that things were worse than when I was last in Cairo, days after the revolution in 2011. And I stated that things would get worse before they would get better…

Well, things are now worse, but the good news is, they may get better sooner than I expected.

In the meantime, the mainstream media is blaming the recent spike in crude prices on the turmoil in Egypt and the possibility of a crisis at the Suez Canal.

Here’s the real scoop.

Egypt is in turmoil. The current president, Mohamed Morsi, is learning about democracy the hard way.

Morsi, supported by the Muslim Brotherhood, was Egypt’s first-ever democratically elected president. That means a lot. But, as it turns out, he’s also largely ineffective, and hasn’t sought to create a coalition. Instead, he’s ruling by decree, and while many countries in this region do require a “strongman” in power, the population can also recognize when there’s no progress being made on the ground.

While I was there in April, the country was as close to anarchy as I’ve seen it. No police to speak off, rampant crime, assaults on women, people driving all over the streets and sidewalks, sometimes even in the wrong direction. The people at the stock exchange wouldn’t speak to me after welcoming me with open arms after the revolution. Hotels were empty, and there was a lot of tension in the air.

Granted, I like that kind of stuff when I visit a country – it makes things more interesting. However, I was also glad to put Cairo in the rearview mirror when I left.

Cairo is in chaos, but that has little to do with the Suez and oil. The Suez is a major thoroughfare for oil and liquid natural gas. However, at just over three million barrels per day of crude, it’s hardly the choke point it was in the past, and carries nowhere near the significance of the Strait of Hormuz or the Strait of Malacca (both of which I have visited recently). About 30% of the world’s daily oil supply passes through those two straits.

So even if the Suez is shut down temporarily, it would be a blip and any rally in oil prices, based on the Suez closing, would be a shorting opportunity.

Of course, I don’t think the Suez actually will be shut down, and even if it comes to that, it’ll be short-lived. You see, the Suez is controlled by the Egyptian Military – the same group that’s now solidly siding against Morsi. They control the guns. Why on Earth would they shut down or allow to be shut down the prize asset under their watch? Especially since they’re being financed by the U.S. government.

Indeed, if there is a casualty in this crisis, it’ll be the reputation of the United States. Once again it’s twiddling its thumbs about the whole situation, not taking the side of the people who are clearly unhappy with the government and who have been waging, until now, peaceful protests on the streets of Cairo and Alexandria.

Sure, democratically elected governments are legitimate and should be allowed to function. But, when they fail to live up to expectations in a climate that’s already stoked with tension, they should either change course, resign, or listen to the masses that elected them in the first place. Egypt was already on the brink when the revolution ousted Mubarak. The job of the new government was to pull the country from the edge, not to push it over.

And “the chase” continues,

Karim Rahemtulla