Political unrest and rising tensions across the Middle East and North Africa are causing unprecedented uncertainty in oil markets.
Eight countries in the world's biggest oil-producing region are in some stage of upheaval. As longtime rulers face revolts, fear of what could happen to oil fields, refineries, pipelines and shipping routes is what has driven oil prices past $100 a barrel for only the second time in history.
"The genie is out of the bottle," says oil analyst Fadel Gheit of Oppenheimer & Co. "Things are a lot worse than they appear."
The Middle East and North Africa supply about 29 percent of the world's oil. Throughout the region, oil production is controlled not by independent companies but by governments — which is one reason why oil prices are so tightly linked to political stability.
In the late 1970s, supply disruptions during Iran's Islamic revolution and fears it would spread across the region kept prices high for about two years. In the past decade, the war in Iraq, attempted attacks on Saudi oil facilities and large protests in Iran have caused jitters in the oil markets and pushed prices higher.
But never before has instability plagued so many countries across the region at the same time. "It's not an isolated incident," says Gheit. "It's really a mess, and that's why the market is reacting the way it is."
U.S. benchmark oil prices climbed as high as $103.41 per barrel Thursday before settling at $97.28 — a 15 percent rise since the start of last week. Gasoline prices have risen to an average of $3.23 per gallon and they are likely to flirt with $4 a gallon in some parts of the country by summer, analysts say.
So far, the most dramatic upheaval has occurred in countries that are not huge oil producers. And oil supplies have barely been affected. Violence in Libya has forced oil companies to idle up to 750,000 barrels a day of production, or less than 1 percent of global demand, according to the International Energy Agency.
The fears of most oil analysts can be broken down into four groups:
— Oil fields, pipelines and refineries come under attack if political battles turn violent — as happened in Iraq following the U.S. invasion in 2003.
— Oil shipments get disrupted by problems in shipping lanes and ports. Some of this is already happening in Libya, where shippers are being held offshore until the safety of the country's ports can be assured.
— Unrest spreads to Saudi Arabia, the world's second biggest oil producer and owner of the world's biggest reserves of oil. This is the worst case scenario for oil markets, and is considered unlikely.
— Long-term instability in the region will weaken national oil companies or make it too risky for international oil companies like Exxon Mobil and Royal Dutch Shell to team with them to produce oil for the world. In the years since Hugo Chavez seized power in Venezuela oil production there has fallen by 20 percent. "The true reconstruction of an energy-producing nation is a big risk to supply," says Guy Caruso of the Center for Strategic and International Studies.
The oil industry is accustomed to political upheaval and instability, and often oil continues to flow despite turmoil. In recent years, Algeria, Angola and Nigeria have been able to keep oil flowing even during internal conflicts that lasted a decade or longer.
If the most extreme unrest doesn't spread beyond Libya to other important oil-producing countries, oil prices could drift back down, says Michael Lynch, president of Strategic Energy and Economic Research.
But Lawrence Eagles, an analyst at JP Morgan, argues that the market is "a long way" from pricing in the impact of a more serious supply disruption and suggests such a disruption could lead to a short-term spike to a range of $150 to $180 per barrel.
Here's a look at countries' strategic significance to the oil industry:
— LIBYA: Libya is on the brink of civil war. Revolutionaries control the eastern part of the country while longtime leader Moammar Gadhafi is holding on to power in the capitol, Tripoli. Libya, a member of OPEC, accounts for about 2 percent of the world's supply. Oil shipments are already slowing, at least temporarily. But oil could become a weapon used by Gadhafi and his opponents. Gadhafi opponents who control much of the country's oil have threatened to cut oil exports. There is also a fear that if Gadhafi begins to lose his grip on power, he could sabotage oil pipelines.
— ALGERIA: Things have calmed down in Algeria after two pro-reform marches calling for the ouster of President Abdelaziz Bouteflika earlier this month were suppressed by massive police deployments. Algeria produces about 1.4 million barrels per day.
— EGYPT: Longtime leader Hosni Mubarak stepped down in the face of protests on Feb. 11. A transitional government headed by military leaders is now in place. Egypt produces about 600,000 barrels per day, but is not an exporter. But it controls the Suez Canal and the nearby Sumed Pipeline which, together move about 3 percent of the world's oil and oil products like gasoline between the Mediterranean Sea and the Red Sea.
— BAHRAIN: Bahrain is a tiny island kingdom 15 miles off the eastern coast of Saudi Arabia where the Shiite minority is revolting against the Sunni monarchy. Bahrain produces no oil, but it is important strategically. It is the base for the U.S. Navy's Fifth Fleet. The fear is that the Shiite minority in Saudi Arabia would be inspired to revolt by the Shiite movement in Bahrain.
—YEMEN: Protesters are demanding that U.S.-backed President Ali Abdullah Saleh step down. Yemen produces very little oil, but it overlooks a narrow shipping channel between the Red Sea and the Gulf of Aden called Bab el-Mandeb through which 4 percent of the world's oil volume flows. Even before the uprising there, the government was wrestling to control the influence of Al Qaeda in the country. One worry is that terrorists could strike ships passing through the strait.
—IRAN: Anti-government protests have gripped Iran recently, a revival of unrest that began in June of 2009 known as the Green Revolution. Iran is the fourth biggest oil producer in the world, accounting for 4 percent of world production. It also borders the narrow Strait of Hormuz, through which 17 percent of the world's oil flows. While conflict there does not appear to be threatening production, Iran, which is mostly Shiite, is thought to be encouraging the Shiite minority in Bahrain and possibly Saudi Arabia.
—TUNISIA AND MOROCCO: Tunisia's government fell in January of 2011 and inspired reform movements across the region. Protesters in nearby Morocco are calling for political and social reforms, but the government there is not under immediate threat. Neither Tunisia nor Morocco is important to world energy markets.