The current wave of upheaval in the Arab world that has unexpectedly swept away the long-lasting presidents of Tunisia and Egypt and which may trigger regime changes all over the region has also steepened the ongoing rise in oil prices and raised fears about the stability of the global oil market. On Jan. 31, after five days of upheaval in Egypt, the price of a barrel of Brent crude on the London-based Intercontinental Exchange passed the $100 threshold for the first time since the financial meltdown of September 2008. Brent crude is currently trading for more than $105, while prices in New York for light sweet crude have observed a similar upward trend since the height of the chaos in Egypt. Markets have been nervous about the emergence of two distinct problems: the regular flow of oil tankers through the Suez Canal and the contagion effect of instability in an oil-rich region.

The first problem should not be a concern. Despite the strong emotional impact it would have, closure of the canal would not disrupt the oil trade. Unlike during its blockade in 1973 after the Yom Kippur War, the Isthmus of Suez is no longer a vital chokepoint for the oil industry: Currently, only 2 million barrels per day (mb/d) transit through it, less than 5 percent of world daily exports in 2010. If one adds the crude that transits through the Suez-Mediterranean pipeline connecting the Red Sea and the southern shore of the Mediterranean Sea, the figure rises to between 3 mb/d and 3.5 mb/d. This amount could be easily replaced by the release of oil currently held as inventory, since stockpiles, especially in American hubs, have been at near-record highs for months. Moreover, oil tankers could still bring Middle Eastern oil to major consuming outlets in Europe by circumnavigating the African continent. This would generate a price premium to the benefit of the shipping industry, but not to a degree that would cause a substantial disruption.

In the longer run, the estimated 5 mb/d of spare capacity held by members of the Organization of Petroleum Producing Countries (OPEC) could be brought to market easily, making up for any reasonable supply disruption. Saudi Oil Minister Ali Ibrahim al-Naimi recently said that his country alone currently possesses 4 mb/d of spare capacity, and Riyadh has repeatedly shown a strong interest in the stability of the oil market and in the maintenance of a "price band" no higher than $85 a barrel. In opposing price hawks within OPEC, the Saudi ruling family remembers very well the pain caused by the drop in oil consumption in the 1980s after a decade of sky-high prices and hopes to avoid making the same mistake twice. 

More importantly, it is very unlikely that the Suez Canal will be closed. With discontent over poor economic conditions, high unemployment and price rises for food and other staples having driven the popular uprising in Egypt, no political faction would be so unwise as to block the canal. The infrastructure provides $5 billion in duties every year, a significant figure for a country of 80 million people with a total GDP of $215 billion. Egypt is also a minor oil importer and would be hurt by any resulting price hike. Even if the situation in the country descends further into chaos, the Egyptian army is trained to operate the canal in case of strikes.

More worrisome is the possibility of a contagion effect of the Egyptian revolution on neighboring countries. Protests and clashes with government forces have taken place in Jordan, Bahrain, Yemen and -- with a sudden escalation over the past few days -- Libya. Even in non-Arab Iran, the ouster of Hosni Mubarak seems to have reinvigorated the Green Movement that made the ayatollahs tremble in the spring of 2009. 

Among these countries, however, only Libya and Iran are major oil producers, and the likelihood of political change in more-important oil players such as Saudi Arabia, the United Arab Emirates and Kuwait is minimal. In these countries, the discontent of the younger generations and the vast immigrant communities has so far been contained. The classic theory of the rentier state, according to which oil-rich countries can easily ensure the acquiescence of their population thanks to their massive resource wealth, seems to hold. Moreover, much like in Egypt, it is difficult to see why new regimes in these countries would provoke a rise in the price of oil. Newly established populist or Islamist governments will surely have a shorter time-horizon than the dynasties currently ruling the Persian Gulf, making them more prone to increasing production rather than restraining it. 

Why then have oil prices spiked in reaction to political events in the Middle East? At least one factor is certain: the penetration of the oil market by financial speculators has brought to oil exchanges players who do not fully understand the fundamentals underpinning the crude oil demand-supply balance and who tend to herd and engage in panic buying based on partial or wrong information. This effect is reinforced by the presence of traders who have no incentive in maintaining the stability of the oil market, but rather make profits on momentum trading and therefore benefit from short-term volatility. Contrary to what history teaches and what markets are assuming, the current problem with oil prices lies much closer to the point of consumption than to the point of production in unstable Arab countries.

**Andrea Bonzanni is an international affairs and energy-policy analyst based in Geneva. He has worked as a consultant for the United Nations and the World Bank and is currently editor-in-chief at the European Center for Energy Security Analysis of Equilibri, a Milan-based think tank. The views expressed here are his alone. He can be reached at andrea.bonzanni (at) graduateinstitute (dot) ch.