Last year’s euphoria over the “Arab Spring” has given way to this year’s focus on the grim realities of the complex and dangerous geopolitics of the Middle East. At this time in 2011, the restive populaces of Egypt, Libya, Tunisia and Yemen were in open revolt against their authoritarian then-rulers. Years of oppression, income and class inequality and rapidly escalating food prices combined to set in motion political events that overthrew previously stable regimes.
Dissidents in Iran and Syria, however, were less successful in overthrowing their governments. Alternatively, perhaps Syria’s Bashar al-Assad and Iran’s Mahmoud Ahmadinejad have just been more ruthless in putting down political opposition to their autocratic rule.
In any case, the determination to pursue the development of a nuclear weapon and bellicose pronouncements about the Strait of Hormuz by the Iranian government and Assad’s increasingly brutal and bloody crackdown against his own people have raised tensions in the region to the boiling point. These geopolitical tensions and the potential for much larger regional conflicts involving Israel and other state actors have fueled concerns about the stability of oil global oil supplies.
More than 17 million barrels of oil pass through the 35 mile-wide Strait of Hormuz every year. The mere possibility that a conflict would occur involving the Strait has led to a rise in the price of benchmark crude oils of all types has been staggering. Since October, West Texas Intermediate (WTI) crude oil has risen from just under $76 per barrel to more than $107 per barrel today. Over a similar timeframe, Brent North Sea crude has risen from the low nineties to more than $124 per barrel today.
Energy economists can argue about the causes and size of the increase in energy prices, but few would suggest that the effects of high energy prices on the global economy will not be felt. Energy is one of the major input costs of almost any business that you can imagine. Crops are not planted, fertilized, harvested or carried to market without considerable energy inputs. Plastics and chemical plants go quiet when petrochemicals are in short supply. Electric-arc steel mills rely heavily on—you guessed it—electricity. Auto, appliance and other assembly lines slow down or even shut down without stable and affordable electric power.
In short, when energy is expensive, doing business is expensive. When doing business is expensive, generally, our economy does less business.
What are needed are a foreign policy and an energy policy worthy of the name. The international community cannot and should not sit by while Iran pursues a nuclear weapon that is likely to use to destabilize the region in perpetuity. Similarly, international community should not feign mock outrage at Assad’s callous disregard for the lives of his countrymen while turning a blind eye to the atrocities that he and his father have visited on the region. If the solid actors on the global stage can come together to put an end to Muammar Gaddaffi’s brutal dictatorship in Libya, then they can reprise their role in Syria.
Only forceful and concerted action by the international community will bring some measure of stability to the Middle East’s two most prominent pariah regimes and bring some measure of stability back to the region. That may buy the global economy and particularly North American economy the time it needs to construct an energy policy that makes some sense.