Could rising food prices alter the map? One government has been toppled and others are fearful of the domino effect as rising food prices are fueling government discontent. Tunisia named a new "unity government" after civil unrest caused President Zine El Abidine Ben Ali to flee for his life. Then new Prime Minister Mohamed Ghannouchi announced a new unity government and kept two top ministers from the cabinet of the former president, so it is unclear if the masses will be appeased.
This uprising is causing concern of a ripple effect that could spread across the region and possibly threaten the rule of staunch U.S. allies like King Hussein of Jordan and Hosni Mubarak in Egypt. While many issues are causing the unrest, it is food prices that are fanning the flames of discontent. This will pressure these governments to lower prices and scramble to build supply of grain and other food stuffs.
This should be a bullish event across the board as these governments dip into their reserves to try to add supply and depress local prices. Record high food prices are causing riots in Algeria and fears of tight supplies are causing export bans in India. While food prices are getting support from this Tunisia unrest, oil prices seem less than moved by this uncertainty.
At this point the market feels there is no threat to supply despite the fact the county borders Libya. Still, oil prices got their share of news regarding supply from OPEC and The International Energy Agency, but at the same time, the market feels that these bodies did not reveal anything new to them that they already didn’t suspected.
OPEC raised their demand forecast while at the same time they cheated on their production quotas. OPEC raised its demand forecast for crude oil by 200,000 barrels per day to 29.4 million barrels per day. They also raised their forecast for global demand by 50,000 barrels per day.
The International Energy Agency is also worried and is surprised by how fast demand is growing. The IEA said demand for 2010 and 2011 would be 320,000 barrels a day higher than their last report. The IEA says that 2010 oil demand would increase by 2.7 million barrels a day year-to-year to 87.7 million barrels a day and 1.4 million barrels a day in 2011 to 89.1 million barrels a day. The IEA is warning OPEC that they had better increase production.
The Wall Street Journal is reporting that President Barack Obama is planning a government-wide review of federal regulations, aiming to eliminate rules that stymie economic growth. I think he may be starting to get it!Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at email@example.com.