Is the Middle East about to deliver another oil shock to the global economy? The U.S. military has targets picked out in Syria and President Obama is trying to convince Congress that America needs to intervene. If the U.S. does go ahead with tactical strikes against the Assad regime, oil markets will be caught in the middle. The size of the repercussions, though, is an open question.
History, both recent and more distant, offers a sense of what to expect when the world's most important oil producing region destabilizes. Syria's oil production, in terms of physical supply, is inconsequential. What's more of a concern is how Syria's neighbours react to any military intervention by the U.S. The Middle East is home to roughly a third of global oil production. The world depends on a steady stream of cheap crude flowing from the region in order to keep the global economy running smoothly.
Any significant reduction in exports -- through a blockage of a key transit choke point such as the Strait of Hormuz or the Suez canal -- will be felt in the rest of the world. Likewise, any sabotaged production in Iraq, Saudi Arabia, or elsewhere would stress global supply. Oil markets are also watching Iran, a country that not only produces millions of barrels of oil a day, but also controls shipping lanes vital to global crude flows. If military strikes in Syria draw Iran into the conflict the stakes get even higher. The potential for such disruptive events is why Brent crude is already trading as high as $115 a barrel in recent days. Some analysts warn that instability emanating from Syria could cause Brent to test its all-time high of $147 a barrel reached in 2008.
The market, clearly, has reason enough to be anxious. Syria is devolving into another on the list of failing Middle Eastern states that's recently expanded to include Libya, Yemen and arguably even Egypt. The country is also another flashpoint in the region-wide hostility between Sunni and Shiite Muslims. The fault lines of that conflict run through nearby Lebanon, as well as key OPEC players such as Iraq, Kuwait, and global oil kingpin Saudi Arabia.
Regardless of the circumstances, whether it's Syrian dictator Bashar al-Assad or Libyan strongman Moammar Gadhafi, regime change is never bullish for Middle Eastern oil supply. When leaders are overthrown, as happens in this turbulent region, oil production subsequently falls. How a regime ends, its ideological stripe, or who puts the next government in power doesn't seem to matter.
Look back to the 1970s when the Iranian Revolution ousted the western-supported Shah. At that time, Iran produced around 6 million barrels a day. More than 30 years later, its daily production is still only around 3.5 million barrels. It could be argued that U.S. sanctions are partially responsible for the diminished output. But that doesn't change the reality that physical supplies are lower. Oil supply, for that matter, doesn't fare much better when the U.S. is responsible for putting the new government in place, as happened in Iraq and Libya.
In Iraq, oil fields have been opened up to some of the world's largest oil companies. Despite the technical sophistication on hand, output is being hampered by sabotage and political instability. Iraq's oil production has yet to get back to levels from the 1980s when the country was under the brutal authoritarian rule of Saddam Hussein. If the relentless sectarian violence in the country is an indication, Iraq, a key OPEC producer, seems to be getting closer to joining Syria in a civil war between Sunni and Shiite factions.
Libya's oil industry has fared even worse. Much like Iraq, Libya is the product of 20th century border making by foreign powers. It's fractured by fierce tribal and regional divisions, which preclude the functioning of an effective central government. Prior to the demise of Gadhafi's reign, which stretched four decades, the country pumped 1.6 million barrels a day. In the ongoing chaos following his ouster in 2011, production has tumbled to less than a third of that amount.
A turnaround in U.S. oil production due to fracking technology that's opened up tight oil plays in places such as North Dakota and Texas has caused considerable chatter about domestic energy independence. America, understandably, doesn't want to be beholden to foreign oil. North American oil prices, on the other hand, are already trading around a two-year high and are now firmly back in triple-digit territory.
Military intervention in Syria holds the potential to send crude prices bounding even higher. As much as we'd like to be sheltered from a Middle Eastern oil shock, we may soon find out that our economies are as vulnerable as ever.
In Nigeria's Akwa Ibom State, an ExxonMobil pipeline ruptured on May 1 and spilled over a million gallons of oil, <a href="http://www.guardian.co.uk/world/2010/may/30/oil-spills-nigeria-niger-delta-shell" target="_hplink">reported the <em>Guardian</em></a>. The leak continued for seven days before it was stopped. <a href="http://www.huffingtonpost.com/omoyele-sowore/the-oil-spill-no-ones-tal_b_649220.html" target="_hplink">HuffPost blogger Omoyele Sowore explained</a> in July 2010 that an oil spill from ExxonMobil operations was nothing new to the country. He wrote that an "environmental catastrophe [had] been going on since December 2009." He described the toll on Nigeria: "There's oil on the surface of the ocean, wildlife coated in crude, fishermen losing their businesses." In 2011, the Nigerian government said there had been <a href="http://articles.latimes.com/2011/aug/05/world/la-fg-nigeria-oil-20110805">more than 7,000 oil spills</a> in the country between 1970 and 2000 that could take up to 30 years and $1 billion to clean up.
In May 2010, several thousand barrels of oil spilled from the Trans-Alaska pipeline "during a scheduled pipeline shutdown at a pump station near Fort Greely," <a href="http://www.huffingtonpost.com/2010/05/26/alaska-oil-spill-trans-al_n_589974.html" target="_hplink">explained AP</a>. No injuries were reported and officials said the spill was likely "limited to the gravel on top of the containment area's line."
In June 2010, a Chevron pipeline ruptured and spilled oil into a creek near Salt Lake City, Utah. It was first estimated that over 17,000 to 21,000 gallons spilled into the creek, which leads into the Great Salt Lake, <a href="http://www.huffingtonpost.com/2010/06/12/utah-oil-spill-500-gallon_n_610232.html#s99698" target="_hplink">reported AP</a>. Around 150 birds were "identified for rehabilitation." The <a href="http://www.huffingtonpost.com/2010/06/14/utah-oil-spill-officials-_n_611014.html" target="_hplink">oil did not reach the Great Salt Lake</a>, however. <a href="http://www.huffingtonpost.com/2010/07/14/chevron-cited-for-oil-spi_n_646340.html" target="_hplink">Chevron was later cited for the spill</a>, which released an estimated 33,000 gallons in total. In March 2012, <a href="http://www.huffingtonpost.com/huff-wires/20120324/us-oil-spill-utah/" target="_hplink">a group of 66 residents of a Salt Lake City neighborhood sued Chevron</a> for damage caused by the Red Butte Creek spill and a smaller spill in December 2011.
In late July 2010, an Enbridge pipeline in southwestern Michigan sprung a leak and <a href="http://www.huffingtonpost.com/2010/07/27/michigan-oil-spill-among_n_661196.html" target="_hplink">spilled over 800,000 gallons of oil into a creek</a> which flows into the Kalamazoo River. By August, a regional EPA administrator said that significant progress had been made at the site, but "the agency cautioned that it will take months to complete the cleanup," <a href="http://www.huffingtonpost.com/2010/08/02/michigan-oil-spill-epa-of_n_667556.html" target="_hplink">reported AP</a>. By the end of September, <a href="http://www.huffingtonpost.com/2010/09/27/michigan-oil-pipeline-res_n_741233.html" target="_hplink">the pipeline -- which travels from Ontario to Indiana -- was back in operation</a>. The EPA later <a href="http://www.huffingtonpost.com/huff-wires/20111116/us-michigan-river-oil-spill/" target="_hplink">reported that about 1.1 million gallons of oil were recovered</a>, but pipeline operator Enbridge said that it would stick with previous estimates that only about 843,000 gallons were spilled.
In July 2010, China experienced what was reported as the "<a href="http://www.huffingtonpost.com/2010/07/21/china-oil-spill-grows-off_n_653852.html#s120708" target="_hplink">country's largest reported oil spill</a>" after a pipeline rupture near the northeastern port city of Dailan. Several days after the spill, cleanup efforts were underway over a 165 square mile (430 square kilometer) area of the Yellow Sea. The Chinese government reported that about 1,500 tons or 461,790 gallons of oil had spilled, but <a href="http://www.huffingtonpost.com/2010/07/30/china-oil-spill-far-bigge_n_665038.html#s120708" target="_hplink">experts contended that the spill could have been "dozens of times larger,"</a> reported AP.
In late April 2011, a pipeline in northwestern Alberta began leaking, and created the worst spill in the province in 36 years, <a href="http://www.calgaryherald.com/news/alberta/Rainbow+pipeline+leak+largest+years/4720888/story.html" target="_hplink">reported the <em>Calgary Herald</em></a>. About 1,176,000 gallons of oil were reportedly spilled from the Rainbow pipeline, which is operated by Plains Midstream Canada. The <em>Globe and Mail</em> revealed that the pipeline operators "<a href="http://www.theglobeandmail.com/report-on-business/oil-on-rainbow-line-halted-8-hours-after-problem-detected/article2013335/" target="_hplink">detected a potential problem nearly eight hours before halting the flow of crude</a>." A nearby school in a First Nation community was closed after residents reported "nausea, burning eyes and other symptoms," and several animals were found dead. In late July, Plains Midstream <a href="http://www.huffingtonpost.ca/2011/07/28/alberta-pipeline-owner-as_n_912796.html" target="_hplink">requested to re-open the pipeline</a> and begin to ship oil to Edmonton again.
In June 2011, an oil <a href="http://www.huffingtonpost.com/2011/07/01/china-offshore-oil-spills-bohai-bay_n_888473.html" target="_hplink">spill occurred about 25 miles off the coast of China's Shandong province</a> in Bohai Bay. A second spill followed in July. In late August, <a href="http://www.huffingtonpost.com/2011/08/26/new-seeps-in-china-spill_n_937809.html" target="_hplink">it was reported</a> that ConocoPhillips had discovered more oil seeps in Bohai Bay, although only "1 to 2 liters (a quarter to a half-gallon) of oil and drilling mud were being released each day." The company reported that the 2011 spills released 29,400 gallons of oil and 2,500 barrels of drilling mud into the bay and that most of it was recovered. In September, <a href="http://www.huffingtonpost.com/2011/09/05/china-oil-spill-conocophillips_n_949745.html" target="_hplink">China's State Oceanic Administration claimed that oil was still seeping</a> underwater. In early 2012, Texas-based ConocoPhillips <a href="http://www.huffingtonpost.com/huff-wires/20120124/as-china-oil-spill/" target="_hplink">reached a settlement deal with the Chinese government</a> for $160 million.
In July 2011, a pipeline beneath Montana's Yellowstone River ruptured and sent an oil plume 25 miles downstream, <a href="http://www.huffingtonpost.com/2011/07/02/yellowstone-oil-spill-pro_n_889363.html" target="_hplink">reported AP</a>. Despite reassurances from ExxonMobil that the pipeline was safe, <a href="http://www.huffingtonpost.com/2011/07/06/yellowstone-river-oil-spill-exxon-mobil_n_891246.html" target="_hplink">the July spill released what was originally estimated to be 42,000 gallons of oil</a>. With other 1,000 workers assisting the cleanup, ExxonMobil <a href="http://www.huffingtonpost.com/2011/11/04/yellowstone-river-cleanup-costs_n_1077106.html" target="_hplink">estimated that it would cost $135 million to clean the river</a>. In January 2012, <a href="http://www.huffingtonpost.com/2012/01/19/exxon-yellowstone-oil-spill_n_1216830.html" target="_hplink">it was reported</a> that ExxonMobil had increased its estimate of the spill size by 21,000 gallons. AP later <a href="http://www.huffingtonpost.com/2012/04/06/yellowstone-river-spill-response-plan_n_1408328.html" target="_hplink">reported the estimated spill size as 63,000 gallons</a>. <em><strong>CORRECTION:</strong> A previous version of this slide stated the estimated spill size as 63,000 barrels instead of gallons.</em>
In August 2011, <a href="http://www.huffingtonpost.com/2011/08/15/north-sea-spill-uk-oil-spill_n_927078.html" target="_hplink">an oil rig off the eastern coast of Scotland began leaking</a> oil into the North Sea. Royal Dutch Shell, which operates the Gannet Alpha oil rig, initially reported that 54,600 gallons of oil were spilled. A second leak soon occurred, turning the spill into the worst in the North Sea in a decade, <a href="http://www.huffingtonpost.com/2011/08/16/north-sea-oil-spill-shell_n_927941.html" target="_hplink">reported AP</a>. Several days later, Shell announced that it had "closed a valve from which oil was spilling into the North Sea," <a href="http://www.huffingtonpost.com/2011/08/19/shell-says-it-has-closed-_n_931379.html" target="_hplink">according to AP</a>. The spill released about 1,300 barrels of oil, which spread out over a 2.5 square mile (6.7 square kilometer) area.
In mid-November 2011, Brazilian authorities began investigating an offshore spill near Rio de Janeiro, <a href="http://www.huffingtonpost.com/2011/11/17/chevron-oil-spill-brazil_n_1100062.html" target="_hplink">reported AP</a>. Chevron initially reported that between 400 and 650 barrels of oil had spilled into the Atlantic, while a nonprofit environmental group using satellite imagery estimated that the spill rate was at least 3,738 barrels per day. Chevron soon claimed full responsibility for the spill. The brazilian division's COO said, Chevron "<a href="http://www.huffingtonpost.com/2011/11/20/brazil-oil-spill-chevron-_n_1104070.html" target="_hplink">takes full responsibility for this incident</a>," and that "any oil on the surface of the ocean is unacceptable to Chevron," reported AP. In December, Brazilian prosecutors announced that they were <a href="http://www.huffingtonpost.com/2011/12/14/brazil-oil-spill-chevron-payment_n_1149554.html"target="_hplink">seeking $10.6 billion in damages</a> from Chevron for the spill that leaked nearly 126,000 gallons of oil. In March 2012, a Brazilian federal judge <a href="http://www.huffingtonpost.com/2012/03/18/brazil-oil-spill-chevron_n_1355923.html" target="_hplink">allowed prosecutors to file criminal charges against Chevron and Transocean</a> and 17 executives from both companies were barred from leaving Brazil.
In October 2011, a Liberian-flagged cargo ship ran aground on a reef in Northern New Zealand and began leaking oil. With oil washing up on shore, a government minister deemed it <a href="http://www.huffingtonpost.com/2011/10/11/new-zealand-oil-spill_n_1004643.html" target="_hplink">the country's largest maritime environmental disaster</a> a week later. Although over 2,000 sea birds were killed by the spill that spilled about 400 tons of fuel oil, <a href="http://www.huffingtonpost.com/2011/11/22/new-zealand-oil-spill-penguins_n_1107289.html" target="_hplink">343 little blue penguins were rescued and cleaned of oil</a>. <em>[<a href="http://www.huffingtonpost.com/2011/12/22/new-zealand-oil-spill-penguins-released_n_1151788.html" target="_hplink">Watch video of the penguins' release into the wild here.</a>]</em> In January, <a href="http://www.huffingtonpost.com/2012/01/10/new-zealand-oil-spill-ship_n_1196568.html" target="_hplink">half of the stricken Rena began sinking</a> into the sea after breaking apart and spilling over 100 cargo containers.
The spill, which took place near the coast of Nigeria, was reported as "likely the worst to hit those waters in a decade," <a href="http://www.huffingtonpost.com/2011/12/22/shell-oil-spill-nigeria_n_1164891.html" target="_hplink">according to AP</a>. After two days, the spill had affected 115 miles (185 kilometers) of Nigerian coastline. Several days after the December 20 spill, <a href="http://www.huffingtonpost.com/2011/12/26/shell-nigeria-oil-spill_n_1170198.html" target="_hplink">Shell reported that the leak -- which occurred about 75 miles offshore -- had been contained before it reached the Nigerian coast</a>. The spill, which covered 350 square miles of ocean at its peak, was reported as having released less than "40,000 barrels -- or 1.68 million gallons" of oil.
In June 2012, 126,000 gallons of sour crude oil leaked from a submerged pipeline into the <a href="http://www.huffingtonpost.ca/2012/06/08/alberta-oil-spill-red-deer-river_n_1581008.html">Red Deer River in Alberta, Canada</a> before being swept downstream to the Gleniffer Lake and Reservoir, a main source of drinking water for several communities near the spill. A $75 million <a href="http://www.huffingtonpost.ca/2012/06/22/red-deer-river-oil-spill-lawsuit_n_1620267.html">class-action lawsuit was filed</a> against the owners of the pipelines, and in October 2012, the Canadian government <a href="http://www.huffingtonpost.ca/2012/08/07/red-deer-river-fishing_n_1752902.html">banned fishing in the river </a>in order to study the long-term environmental impacts of the spill. This was the second major spill in the province and for the company that owns the line, <a href="http://www.plainsmidstream.com/">Plains Midstream Canada</a>, in two years. In 2011, 1.1 million gallons of oil leaked into the Peace River from a damaged pipeline in a remote corner of the province.
In October 2012, 336,000 gallons of diesel fuel <a href="http://www.huffingtonpost.com/2012/11/01/arthur-kill-oil-spill-new-jersey_n_2054267.html">spilled into the Arthur Kill waterway</a> as a result of Superstorm Sandy when two storage tank were damaged by 13-foot waves. The spill contaminated the narrow band of water that separates Staten Island from New Jersey, releasing a strong chemical odor into the air as the diesel rose to the surface and evaporated. Officials said a <a href="http://www.huffingtonpost.com/2012/11/01/arthur-kill-oil-spill-clean-up-diesel-shell_n_2058723.html">majority of the fuel spilled was captured</a> by booms and that it was fortunate diesel spilled rather than crude oil because cleanup and dissipation would be much faster.
In late March 2013, ExxonMobil's Pegasus pipeline ruptured and spilled about 5,000 barrels (210,000 gallons) of Canadian heavy crude oil into a residential area in Mayflower, Arkansas. Exxon later <a href="http://www.huffingtonpost.com/2013/04/15/exxonmobil-pegasus-pipeline_n_3082441.html" target="_blank">removed a damaged 52-foot section of the pipeline</a>. The company's cleanup efforts -- which <a href="http://www.huffingtonpost.com/2013/04/09/rachel-maddow-mayflower-oil-spill-exxon_n_3047331.html" target="_blank">reportedly included using paper towels</a> -- were <a href="http://www.huffingtonpost.com/2013/04/12/colberts-arkansas-oil-spill-exxon_n_3071539.html" target="_blank">criticized in the media</a>. <a href="http://www.huffingtonpost.com/2013/04/10/arkansas-oil-spill-health-_n_3045610.html" target="_blank">Local residents began reporting health issues</a> not long after the spill. Arkansas Attorney General Dustin McDaniel has also expressed his concern for the health of Mayflower residents, <a href="http://www.huffingtonpost.com/2013/05/13/arkansas-oil-spill-health-mayflower-moms_n_3267965.html" target="_blank">reported The Huffington Post's Lynne Peeples</a>. One month after the spill, the <a href="http://www.huffingtonpost.com/2013/05/01/missouri-oil-spill-exxon_n_3194177.html" target="_blank">same pipeline leaked one barrel of oil</a> into a residential yard in Missouri.
In January 2013, a <a href="http://www.huffingtonpost.com/2013/01/27/mississippi-river-barge-crash_n_2564418.html">barge carrying 668,000 gallons of light crude oil</a> on the Mississippi River crashed into a railroad bridge. An 80,000 gallon tank on the vessel was damaged, spilling oil into the waterway, which prompted officials to close the river for eight miles in either direction. The spill led to a backup of more than 1,000 barges and the accident is still under investigation. Workers <a href="http://www.sfgate.com/news/science/article/Oil-spill-cleanup-on-Mississippi-River-complete-4257729.php">finished clean-up in early February</a>, but the Coast Guard said 7,000 gallons of crude oil are still unaccounted for. This was <a href="http://www.huffingtonpost.com/2012/02/17/mississippi-river-barge-collision_n_1284166.html">the second collision of an oil tanker</a> on the Mississippi in the past year. In February 2012 two barges collided which led to a five-mile wide closure.
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