Political instability in Egypt is sending the price of oil higher. But could it be the catalyst for an overhaul of the nation's energy policy?
Though Egypt is not a large producer of oil, it does serve as a critical link in the supply chain. About 600,000 barrels of crude oil and roughly 1.2 million barrels of refined oil products travel through Egypt's Suez Canal each day. To date, the vital shipping lane remains open for business, but if it stops running the public could be in for some major pain at the pump and elsewhere.
Energy crises can occur for a variety of reasons: an oil pipeline or drilling rig malfunctions, a producing nation undergoes internal or external conflict, or the fossil fuel could be subject to an asset bubble.
Once the disruption occurs though, one result is certain, says Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M. "You see a lot of activity around Washington," Bingaman told an audience of energy reporters Monday, "People give speeches and propose various things that need to be done immediately, (but) most of the solutions to our dependence on foreign oil cannot be done immediately."
House Energy and Commerce Chairman Joe Barton, R-Texas, told Fox News' Neil Cavuto that the lesson to be learned from the events in Cairo is clear. "It shows we need a domestic policy that supports energy development in the United States," he said, "If we drill in the United States we lessen our dependence on that region." However, Congress' appetite for legislating soon after an incident varies.
Some disruptions, like the OPEC embargo of 1973, lead to legislative actions that change the energy policy of the nation. After losing access to oil from the Mideast for six months, the United States passed laws to create the forerunner to the Department of Energy, set a national highway speed limit, and authorize the construction of an oil pipeline to bring Alaskan oil to market easier.
So far, the explosion at the Upper Big Branch coal mine in West Virginia that killed 29 workers in April of 2010 and BP spill in the Gulf of Mexico later that month have mostly just produced talk.
According to one expert, it all comes down to the consequences. "Disruption is disruption," says Kevin Book of ClearView Energy Partners. He says that what leads Congress to pass large, comprehensive energy legislation is an event with economic pain that is equal or greater than the pain that a new law would bring.
"The Arab oil crisis was a galvanizing event. It changed everything about how we looked at oil," says Book, hence the strong push to lessen the nation's consumption of it.
While it remains to be seen if the political unrest in Egypt will spur Congress to act, Book notes that it is usually global supply concerns that lead to large-scale changes in the nation's energy policy.