Monday, February 7, 2011

The real cause of Egypt unrest

While U.S. media has focused on the nature of the civil unrest in Egypt, wondering how soon Hosni Mubarak might step down and who or what might replace him, little has been said about the root causes of all the commotion. This matters on a couple of levels there, and has major consequences for our way of life here. Maybe not in 2011, but soon enough.

Egypt, like most of the Arab world, has some oil. Not oceans of it like Saudi Arabia and Kuwait, but enough to export. It also has a growing population. Unfortunately, being on the edge of a desert, Egypt has to import much of its food, some 60% of its wheat.

For most of its recent history, Egypt exported a lot of its oil, using the profits to subsidize the cost of its internal use of fuel as well as a lot of its food supply. This has worked pretty well, until quite recently. Egypt has run into a tipping point of sorts. First, oil production has hit a plateau; they can't extract it as fast as they used to. In short, they've hit a peak. Lots more down there, but there's a limit to how fast you can pull it out of the ground, and they've hit it. Chances are pretty good that future production will continue to plateau, or even decrease.

Second, that growing population now uses as much petroleum as the country produces. The problem with this is that there is now not that much to export. While future use may result in Egypt being a net importer of oil, the more immediate problem is that the loss of that export revenue puts the government in a bind. No exports, so no export income, so no way to provide price supports for both food and fuel.

The government decided to prop up fuel prices, letting food prices seek their own level. Food prices naturally rose -- greatly -- setting off the civil unrest.

Do you see where this is going? The easy oil is gone, or soon will be, at the levels we all seem to want it, on a world-wide level. Even the Arab producers are becoming net importers. When everyone wants oil, the price will naturally go up, and I do not just mean Egypt. I mean all of us.

Tell me again why you have three cars in your driveway?


  1. 1. excellent post. 2. argghhh, there are four cars in my driveway.

  2. Yes, Egypt matters…
    Also Egypt was (and shall stay that way) an important buffer between the Arab World- Israel and had strong ties with the US. An unstable Egypt will result in an unstable middle East ( not that the Middle East is stable now but it could get worse)

  3. Very well put. Egypt is a symbol for the whole world. It is also strategically important to the major powers because of the Suez Canal, and protecting the government of Saudi Arabia. When the Soviet Union built the Aswan dam during the cold war, the U.S. almost panicked.

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  5. Another blogger said much the same thing, but with better graphs: