![]() It was another five months before prices returned to pre-crisis levels, which meant that for more than eight months oil prices were, on average, 40 percent higher than pre-crisis levels. During the early stages of Operation Desert Storm, crude oil prices rose 141 percent over a three-month span. In terms of how high crude oil prices may rise, the summer of 1990 may provide some perspective. Imagine what may happen to prices if investors perceive the possibility of an interruption to Iran’s production of 3.7 million barrels per day, or Saudi Arabia’s 8.6 million barrels per day. ![]() Keep in mind that oil prices spiked 15 percent on the perceived threat that Libya’s production of 1.6 million barrels per day might be in jeopardy. The extent and duration of the spike in oil prices will depend largely on whether the threat extends beyond smaller oil producers like Libya, Algeria, Yemen, and Bahrain, and into larger players like Saudi Arabia and Iran. The Global Cost of Turmoil: Higher Oil PricesĪs we have already begun to see, the mere threat of a disruption to the world’s oil supply has caused the price of crude oil to spike. As the events play out in the Middle East and North Africa, I believe the turmoil in the region will perpetuate an economic domino effect that may result in dramatic shifts across the investment landscape over the course of the next year. History teaches us that the revolutionary road is lined by economic shocks and currency instability. Similarly, the 1991 collapse of the Soviet Union was followed by a severe recession and hyperinflation. This crisis was a particularly vivid experience for me because at the time I was running European fixed-income trading for Morgan Stanley. The unification of Germany in late 1990, for instance, led to the European currency crisis in 1992-1993 and essentially plunged the entire continent into a deep recession. While my Russian colleagues recounted the winds of change that brought the collapse of communist regimes in the early 1990s, I could not help but reflect on how the political transformations of that period also precipitated turmoil in the financial markets and severe recessions. One morning I watched images of Egyptian protestors standing on tanks in Tahrir square in Cairo, and at a dinner that evening I listened to first-hand accounts of when Boris Yeltsin stood on a tank outside the Russian White House during the 1991 revolution. I must admit, being at the scene of the Russian revolution 20 years later made the events transpiring in Egypt feel all the more historic. When the populist revolution broke out in Egypt, I happened to be in Moscow speaking at the Troika Dialog Russia Forum. Saving Earth Britannica Presents Earth’s To-Do List for the 21st Century.The democratic movement erupting across the Middle East and North Africa (MENA) reminds me of the historic political changes that occurred the early 1990s when the Berlin Wall fell, the Cold War ended, and a series of revolutionary events led to the dissolution of the Soviet Empire. ![]()
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