“A worst-case scenario, in which oil prices jump to $200/bbl would pose severe risks to global growth, inflation and policymaking. Asia, as a heavy oil importer, is the most vulnerable region…” This is extracted from Business Monitor International’s (BMI) newly published MENA Crisis: The Key Risk To Global Recovery And Stability, which examines the consequences of popular uprisings in the Middle East and North Africa for the region’s evolution, and the impact of the unrest on the economies of Asia, Europe, Africa, and Latin America. All this at a time when Saudi Arabia’s minerals industry is coming of age – as noted in the forthcoming April issue of International Mining.No country in the region is completely immune to experiencing large-scale social unrest, according to BMI. Indeed, the upcoming ‘Day of Rage’ in Saudi Arabia highlights the growing risks to regimes that were previously assumed to be fundamentally stable. Key findings:
- Algeria, Bahrain, Iran, and Yemen are at most risk of further instability. No state is immune to unrest and even Saudi Arabia is vulnerable. Any disturbances there could cause oil prices to surge to $200/bbl
- Most Asian countries import more than 90% of their oil needs leaving them particularly vulnerable to high oil prices. Singapore, India, Vietnam, Indonesia and South Korea are most at risk
- A sharp spike to $200/bbl (followed by a sharp drop) would shave about 0.5pp from BMI’s forecast of 3.1% US growth in 2011 and 0.8pp from its 1.8% Eurozone forecast. On a global basis, net oil importers would unsurprisingly be hardest hit, with Turkey, South Africa, Singapore and India the worst off
- Oil exporting countries including Venezuela, Nigeria, Angola, and Russia stand to benefit from the crisis, but if oil prices rise too high and remain elevated, these states will suffer as the global recovery falters
- Supply-side risks to oil and massive political uncertainty in a strategically important region are bad news for risk trades across global financial markets.