Instability in the Middle East continues to put the global recovery in question. Sweet crude oil prices have risen by nearly 25% percent within the last four weeks. This unprecedented price hike is a associated with real oil output disruption as a result of civil war and blood-shed in Libya. This important North African country produces nearly 3% of global oil production and has large reserves in the event of oil disruptions elsewhere. With thirsty Asian countries demanding a record amount of energy resources, in addition to reports indicating an increase in global manufacturing, the current situation makes for speculative oil trading. In fact, some energy traders and analysts are suggesting that today's crude prices of $105 may increase to even $200 if the situation is not quickly resolved.
The president and members of his cabinet recognize that high prices at the gas pump could stall the fragile U.S. economic recovery. It could even result in another recession associated with significant job loss. In response, proposals have been made that could open the Strategic Petroleum Reserves. This would temporarily lower crude prices with increased supply. However, we at Robot Forex are skeptical that Muammar Gaddafi, the long standing Libyan dictator will simply pack his bags and go home. To make the situation more volatile and complex, the U.S. is considering establishing a No-Fly Zone over Libya with NATO's assistance. This will prevent pro-Gaddafi forces from using aircraft from attacking rebels attempting to overthrow the tyrant dictator.
While the Robot Forex team appreciates human rights for everyone, the Middle East is not known for its history of tolerance and flexible view-points. While Gaddafi is linked with horrific terrorist acts and an atrocious human rights record, he did bring some stability to that region. With Islamic extremism taking hold in many formerly moderate countries, the United States and her allies might unknowingly be helping an Islamic regime come to power in Libya.