Egypt's unrest revives debate about U.S. oil dependency

U.S. policymakers are watching the political unrest in Egypt closely for signs of oil-price volatility, while proponents of offshore drilling are citing the protests to push for expanded domestic production.

Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) said Monday that he expects the protests over Egyptian President Hosni Mubarak’s leadership to revive the debate about the country’s reliance on foreign oil.

“Any time there is a disruption or a potential disruption in international supplies of oil, you see a lot of activity around Washington,” he said. “I’m sure there will be calls for us to ramp up production or whatever, depending on how the situation in Egypt resolves itself.”

Those calls are coming already. Rep. Jeff Landry (R-La.) called on President Obama to ramp up domestic oil production so that the country is not reliant on the Middle East during times of political uncertainty.

“Unrest in the Middle East can drive the price of energy through the roof. It is the kind of danger that will just take the steam clean out of any recovery we have in the economy right now,” Landry said Sunday on Fox News.

For weeks, drill-state Republicans have been pointing to gas prices, which are at a two-year high, to argue for expanded drilling.

Now Landry is arguing that gas prices could surge even higher as a result of the protests in Egypt and elsewhere in the Middle East, particularly if passage of oil through the Suez Canal, a major Egyptian trade route, is shut down.

“My concern right now, today, is to make sure that every American, regardless of whether they live in Louisiana or up in Iowa or over in New York City, doesn’t wake up in the next couple of weeks and find that the price of gas at the pump has doubled,” Landry said.

White House press secretary Robert Gibbs said Monday that Obama administration officials are monitoring the possible effect of the protests in Egypt on oil prices, but he stressed that the White House is not aware of any oil transportation problems in the region.

"Well, again, as I said earlier, we've not received reports — at least when I came out here ... that there seemed to be transportation disruptions in the area of the Suez," Gibbs said. "So ... I think that is among the many concerns that — that we will throughout the government continue to monitor."

Meanwhile, T. Boone Pickens said Monday that the crisis in Egypt shows that the country needs to rely more on domestic energy sources like natural gas.

“I urge Congress and the Obama administration to enact energy legislation now that gets America on our own resources,” Pickens said. “We have a tremendous supply of natural gas that can be used as a transportation fuel and is an immediate alternative to OPEC oil.”

A leading energy analyst said Monday that a short-term shutdown of the Suez Canal would likely not result in major problems. But the analyst warned that widespread protests across the Middle East that shut down key oil supply routes could pose a threat.

Kevin Book, an analyst at ClearView Energy Partners, said the biggest concern is how unrest in Egypt might affect the transport of oil. If the Suez Canal, which carries about 600,000 barrels of oil per day from Egypt to other parts of the world, were to be shut down for a short time, reserves from International Energy Agency countries could cover any losses.

If the Suez Canal closure lasted too long, oil would have to be rerouted around the Cape of Good Hope at the tip of Africa, “turning a 15-hour trip into a 600-hour trip,” Book said. Despite the length in transit, Book said the result would be “non-trivial, but manageable.”

The real problems, however, would come if protests in Yemen affected oil transport through the nearby Strait of Bab el-Mandab, which carries 3.2 million barrels of oil per day to other countries, Book said.

“In the event of a shutdown, oil flowing northbound could be diverted to Saudi Arabia’s East-West crude oil pipeline, which currently runs at reduced capacity. However, southbound flows would still be blocked,” Book said.

The other issue of concern, Book said, is whether countries like Iran and Venezuela “seize upon tight global oil system capacity to air grievances or issue proclamations.”