Middle east turmoil plays into markets

Media release

Conception Bay South, NL, February 01, 2011- Consumers in Newfoundland and Labrador will see some effects from the political turmoil in the Middle East when the PUB adjusts prices this coming Thursday, but not as much effect as one would think. That comes from George Murphy, group researcher with the Consumer Group for Fair Gas Prices.

Egypt situation plays heavy

"I think everyone has been watching the situation in Egypt develop in the news over the past week or so, and I'm no different, having watched it all unfold with a different reason: it's effect on oil prices. It has been interesting, none the less. And as word spreads in the Middle East of people trying to address the needed political changes in their respective countries and protests mount, there has been a marked increase in the price of oil as a result, but not the same effect on refined commodities, which for some, may be surprising," said Murphy. "Commodity prices have increased slightly, but a higher Canadian dollar has insulated us from exceptional increases in prices for the most part.

Egypt is a lightning rod for the whole Middle east, where almost forty per cent of the worlds oil comes from. There is a good chance that this upheaval will continue into other oil producing nations and that may well prove to be a harbinger of higher oil prices yet to come. Egyptian market worries are caused by the possibility of short term shipping and supply problems that come from a possibility of the closure of the Suez Canal and not directly linked to a shortage in production. If these mass protests hit countries like Iran or another OPEC producer nation for example, we could see run-away pricing. Prices may very well stay high as well because we simply don't know the ramifications of a change in government and what eff3ect it would have on peace in the Middle east. As much as the present government in Egypt may be hated, it did somewhat ensure a peace brokered between other Muslim nations and Israel, for example.

Oil prices could be entering a term of uncertainty.

The numbers for this week

"This week, I have heating and stove oils to increase by 1.73 cents per litre, diesel to increase by 1.7 cents a litre and gasoline to increase by just 7/10ths of a cent. US consumers have seem a 16 cent per gallon increase to heating, stove and diesel fuels and a 14 cent per gallon increase to gasoline prices in the last week since January 25th in comparison. While refined commodity prices have also increased, particularly distillate fuels, they remain under pressure from weakening consumer demand and higher inventories, in spite if the cold spell in the US northeast. These prices could be much higher than what we are seeing right now, except for the key word 'demand' playing into the refined commodity markets.

"There still is a huge concern over where heating and stove oil prices are heading however. Prices are close to the second highest reached, the highest being $1.24 a litre in the spring of 2008 when oil was working up to hit a record of $147 US a barrel by July, 2008. Heating fuels are again unaffordable for most at a critical juncture of the heating season when temperatures are at their coldest and there's a promise of more cold weather to come.

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For more information, contact;

George Murphy

Group researcher/Member

Consumer Group for Fair Gas Prices