Hosni Mubarek's rapid depature from the Presidency, just one day after vowing to serve out his term, is an amazing demonstration of the power that the protesters were able to wield. Without a trace of violence, the numbers and persistence were enough to topple a 30-year old regime that had the full support of the military. Leaving the politics aside for the moment, there is a growing likelihood that the success of these protests in Egypt will embolden others in the region to step up their efforts and more actively seek change. In the Middle East, there have been indications of potential unrest in Saudi Arabia, Algeria, Jordan, Yemen and Lebanon. But for Saudi Arabia, there is a greater global concern to consider -- oil.
As much as we yearn personally for the increased democratic instincts of the many Arab peoples living under either secular or religiously repressive regimes, none of them would have a greater destabilizing global effect than an even moderate uprising in Saudi Arabia, because of oil. As the largest exporter and OPEC leader, the conundrum the United States found itself in regarding their stance towards the Egyptian protesters and the Mubarak regime would be even more delicate in Saudi Arabia.
The Americans were obviously caught by surprise by events in Egypt, but that can't happen again. How events will unfold in Saudi Arabia and how to properly react are the most important foreign policy questions for the American government to consider right now.
A political disruption in Saudi Arabia could add another fast and significant premium to an oil price quickly racing out of control already. From my perch and as a 25-year veteran of the oil markets, I would surely expect at least another $15 dollar premium would be added to oil's price at the first hint of emboldened protests in the same mold as Egypt arising in the relative calm of the Saudi Arabian streets, putting increased pressure on a global economy still recovering from its 2008 disaster.
The ultimate challenge would be a true supply disruption from the biggest exporter of oil in the world. But things need not get nearly that far for prices to explode to the upside. As I illustrate in my book Oil's Endless Bid, the financial forces working on the price of the crude barrel have become far more powerful than the fundamental forces that are supposed to be the ultimate governors on price. Even the threat of unrest and the slimmest possibility of a destabilized Saudi regime would pour speculative money into the Brent European and Omani and Dubai crude markets, quickly inflating prices you and I (and the rest of the world) pay.
It's already happening: We are seeing a bit of that threat already with differentials of American crude benchmarks fully $14 dollars cheaper than the European and Asian benchmarks, which are much more sensitive to Middle East supplies. But the US price won't be far behind if more trouble is ahead.
The scenario becomes more likely as the revolution contagion spreads. Next-door-neighbor Yemeni protests, already gaining steam are already difficult for the Saudi Sheikdom to ignore. A small group of radical Islamists and educated middle class have formed the first ever opposition "party" in Saudi Arabia, the first that country has ever seen.
The inherent wealth of Saudi Arabia compared to Egypt and Tunisia make the Saudi princes far more capable of quelling public agitation and an outbreak similar to those two countries far less likely. Still, the prospect is interesting, and daunting.
Unlikely as it may seem, this is the foremost follow up question to what is happening in Egypt right now: What will happen in Saudi Arabia next?