At first glance, oil appears to play a minor role in the Arab uprisings this year. We seldom saw any oil-related slogans being raised during the protests, as happened in the past. The public's focus on oil matters at present revolves first, around the impact of supply disruptions on global prices, as is happening today because of the Libyan crisis and the ability of major oil-producing countries (especially Saudi Arabia) to compensate these disruptions with oils similar to the Libyan oil, in terms of quality and delivery time. And second, the focus is on the ongoing investigations in Egypt regarding the sale of natural gas to Israel in return for low prices and huge bribes. However, the most important matter in this regard will perhaps be the nature of future contracts with international oil companies. The question is, will the Arab awakening of 2011 induce radical change in the nature of these contracts, and will they be concluded with greater transparency? Also, will oil revenues be allocated to fruitful projects and services, in such a way as we shall see more transparent budgets and learn where oil revenues are going? Furthermore, will the awakenings be able to deal with these fundamental issues in the Arab economy and society, following the injustice done to the poor and other marginalized sections of society throughout the past decades, which led, among other things, to further unemployment among university graduates, and subsequently to the awakenings of 2011? Oil prices have risen beyond the desirable range of 75-85 dollars/bbl, and settled above an average price of 100 dollars/bbl since the beginning of the year. American crude prices have meanwhile been continuously on the increase for eight consecutive months, which means that this started since before the Arab awakening. However, these rises in prices recently coincided with increased concern in the global markets regarding the possibility of supply disruptions and failure to compensate these, starting with the Egyptian protests, then the Libyan revolution and the expanding tract of the Arab awakening. Forecasts based on available data hold that sustained high prices, as is the case at present, i.e. above the 100 dollar/bbl level, and the scenario where oil remains at these levels throughout this year, will negatively impact the worldwide economy which is trying to recover from the global financial crisis. But will oil prices remain high above the 100 dollar/bbl level throughout the year? This scenario is very probable for two clear reasons: First, the devastation that affected Libyan production and export facilities. Secondly, the ongoing Arab uprisings which are not showing any sign of letting up. According to the chairman of the Libyan National Oil Corporation in Benghazi Wahid Bou Ghasis, production and oil exports from the Masla and Srir fields will be suspended for at least one month, until the damage from the bombardment is assessed. The overall output of these two fields was about 400 kbd/day, out of about 1.7 mbd/day of total Libyan oil production. Thus, oil production from the eastern fields controlled by the rebels will halt. There are pessimistic assumptions spreading among analysts and speculators, especially when prices rise. However, it is known now, through experience, that markets comprise checks and balances that prevent pessimistic scenarios from taking place. Here, we are specifically pointing at the primary role played by Saudi Arabia in achieving balance between supply and demand in global markets during political crises or natural disasters. Saudi Arabia does so by closely observing commercial inventories in the major industrialized countries, and actual increases or decreases in global demand. Of course, this role takes place through Saudi Aramco and its involvement in various global markets. Perhaps what is even more important than this is the surplus crude oil production capacity enjoyed by Saudi Arabia, estimated in normal conditions at 1.5 mbd/day, and recently at 4 mbd/day, which was indeed tapped to offset the current shortage caused by the Libyan conflict. There is another oil-related issue that has emerged in the midst of the recent uprisings, and became an important concern for Arab citizens, which is the sale of Egyptian natural gas to Israel in return for low prices and massive bribes handed over to senior officials. The Egyptian youths insisted on getting to the bottom of this matter, and today, official investigations are taking place regarding this issue. Nearly two decades ago, Israel attempted to get access to Qatari natural gas. However, the proposed project failed at the time for many reasons, including Israel's insistence on receiving gas at low prices that are less than those gas was traded at in Europe at the time. U.S. diplomacy supported the Israeli point of view. However, the idea of selling Qatari gas to Israel at low prices was absolutely rejected by the Qatari petroleum authorities at the time, and also by the political leadership in the country. The project never saw the light, despite the media frenzy that surrounded it back then. It is clear now that Israel, after this failure, had to resort to Egypt to secure natural gas supplies, on terms and following approaches that are becoming clearer and clearer now. The most important question for the future then is: What are the implications of the awakening on the relations between Arab countries and international oil companies, especially as markets are improving and favoring producers? Will the nature of the contracts between the two sides be revised? More importantly, will the manner in which oil revenues are distributed among the citizens change, to become more transparent, and benefit a wider spectrum of individuals, while corruption is curbed? *. Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
