As the world's top oil glutton, the U.S. has long feared a scenario like the one currently unfolding in the Middle East – governments in danger of falling like dominoes and thus threatening the stability in a region that contains 56 percent of the world's oil reserves.
It seems just a matter of time before Libya, led by deranged dictator Moammar Gadhafi, falls. The world's 10th largest producer is being torn by Civil War and the fear that violence will spread to other nations has sent oil prices spiking to a 28-month high.
A critical lifeline for the U.S. economy is the Suez Canal which is controlled by Egypt. The crucial waterway, which handles 3 million barrels of our oil transit daily, was not disrupted despite the regime change there two weeks ago.
While fears about the flow of oil from places like Libya and Bahrain are affecting pump prices, all bets are off the table if Saudi Arabia becomes one of the regime-change dominoes. While Libya produces 2 percent and Iran 5 percent of the world's oil, the Saudis account for a whopping 12 percent and any disruption there carries serious impact on global economies.
Some project that such a scenario would easily double today's gas prices and could even spike to $10 per gallon. This would eliminate an already fragile economic recovery, affecting consumer spending and economic growth. It could even be worse in Great Britain where gas prices topped $8 a gallon last year.
In its short-term energy outlook earlier this month, the U.S. Energy Information Administration projected crude oil to average about $93 per barrel in 2011, $14 higher than the average price last year. All this week, prices have been trading around the $100-a-barrel mark.
Economies took a devastating hit in July of 2008 when oil prices surged to $140 a barrel. If the Saudi oil fields are hit, some say the price could top $200 a barrel, doubling prices at the pump to $10 per gallon.
This week, the nation's average price for regular unleaded jumped 9 cents a gallon to $3.23. Oil dropped Thursday for the first time in nine days after the International Energy Agency said Libya production may have been cut less than originally feared.
Opening up our wallets to pay higher prices to Mideast suppliers each day when this country is sitting on the richest coal, oil and natural gas deposits in the world doesn't make sense to many Americans. The latest instability in the Mideast is fueling new discussion on developing new green energy alternatives as well as debate on opening more areas for exploration and drilling within our borders such as the southern Atlantic coastline, the eastern areas of the Gulf of Mexico and northern shore of Alaska.
This debate with environmentalists over drilling has been going on for two decades. While the goal of drill proponents is to reduce our reliance on foreign oil, environmentalists argue that it will increase pollution, cause chemical and oil spills along our coastal communities and at sea, endangering whales and other wildlife.
As revolutions grow and continue to consume the Middle East, major oil consumers like China and Japan and the United States area scrambling to find more suppliers. Since America consumes 19 percent of the world's oil, we may soon face the tough choice of either committing to drill for our own oil, or continuing to be at the mercy of foreign suppliers.
But as for the present, since the flow of oil has become so much of the life blood of our nation, any large disruption is sure to carry life-changing consequences for all Americans.
By Jim Zbick