As you read this, I am flying to Las Vegas (yes it's tough, but somebody has to do it!).
I'm headed to "Sin City" for the first in a crucial series of meetings on a major new development in energy that may well make you some serious money. I promise to fill you in on all of the details as they develop.
But today, all eyes are on Syria.
And while the White House has assured us that there will be no boots on the ground this time, the uncertainty of what will happen next in the Middle East is weighing heavily on the market.
As the world braces for military action against Syria, crude oil prices continue to rise.
This "oil barometer" is a good gauge of that uncertainty, even though Syria has little direct impact on the international trade in crude. After all, Syria is not a major producer and does not figure in, or have a genuine influence upon, main transit routes.
So what's really behind the big move in oil prices?
Here's what oil traders fear the most. . .
What Oil Traders Dread
With Syria, it's all about its place on the map and what that means to the region in the long run.
While any geo-military event like the one about to play out will increase volatility in oil prices, a power vacuum in the Middle East would strike at the core of a trader's basic fear—an interruption in supply.
With Syria, the oil market cares little whether President Bashar Assad survives. What it really cares about is what comes next. Removing another tyrant from a region that has known too many is one thing. Being left with a power vacuum that is likely to usher in sectarian fighting and civil war is quite another.
Not too long back when I was advising in Iraq and scheduled to take up a position there, I received a gift from the staff at was then called the IRMO (Iraq Reconstruction Management Office). It was a somewhat tongue-in-cheek "award." It a wonderful inscribed box containing two decks of playing cards and some dice.
The humorous reference behind the gift was to the time we wasted "playing games" while awaiting higher pay grades to make decisions.
However, there was a more serious (and rather accurate) symbol being portrayed, and it was something else entirely.
Part of the message was that stability in this part of the world is about as solid as a house of cards.
As for the dice?. . .
Just about any attempt to improve the situation is akin to shooting craps, as our recent excursions in the region have proven.
American troops are out of Iraq and matters are winding down (at least for the U.S.) in Afghanistan. But nothing else has really changed. The region from Turkey in the north to Egypt and Libya in the west has only begun a period of transition.
And that transition to an unknown new political environment is what shakes the markets this morning. What happens in Syria will have a decided impact on the rest of the Middle East.
A Western incursion of any sort will start waves and there is no way to determine at this point what they will engulf.
And given the latest round of destabilization in Cairo, the power dynamics in the region are up for grabs. Iraq was dethroned as the power epicenter, then Libya, then Egypt, then Syria. Iran waits in the wings, but is already weighted down by significant domestic economic weakness.
Most observers now assume Turkey is the heir apparent, an image that harkens back to the old Ottoman Empire. But Istanbul and Ankara have experienced their own riots recently and the Turkish government is once again facing a renewed threat to its secular nature from emboldened Islamic activists.
In short, there is no secure transition to power in the Arab Middle East. As for Israel, it is bracing for an attack on its own territory should Damascus make good on threats made in retaliation for any Western military operation.
Oil Prices and the Great Unknown
Against this entire backdrop, oil is the first market component to show a reaction.
The spread between the Brent futures contract price for crude set in London and WTI (West Texas Intermediate) set in London is again widening.
These two benchmarks are still the standards against which the vast majority of daily oil trades are made worldwide. Brent has priced at a premium for three years, owing to its more frequent use as the benchmark for actual trades in other parts of the world.
Brent also represents European supply-demand levels. It is the first to be hit by any concerns over possible supply interruptions. Brent hit $117 a barrel in inter-day trade yesterday, while WTI is now pushing $110 a barrel.
And you can be sure these high price levels will continue so long as the uncertainty remains.
Yes, it will translate into higher gasoline prices at home. RBOB ("Reformulated Blendstock for Oxygenate Blending), the NYMEX traded gasoline futures contract has gained more than 5% in less than a week and that will eventually finds its way to the pump.
The larger concerns are about steadily rising oil prices, resulting in a contraction in already weak economic recoveries on both sides of the Atlantic. Even if this results, it will not appear overnight. But it is a sign of the media times that some pundits are already using this to overhype the situation.
But the human toll exacted already and now likely to increase on the streets of Aleppo and elsewhere in the war torn country are all too real, certainly exceeding the inconvenience of paying more to drive the SUV back home.
What nobody knows now is how long this latest unrest will remain. The fighting inside Syria has been ongoing for some time. As early as today, however, the first concerted foreign element may be introduced into this dangerous equation.
And that threatens to intensify the crisis.
Kent Moors
Oil and Energy Investor
