Will Egyptian Turmoil Mean Even Higher Gas Prices?

Egypt produces very little oil, but what happens there in the aftermath of violent street protests could well affect the price of crude and what American motorists pay at the pump.

The good news is, so far it hasn't and a growing number of oil industry analysts think it won't.

The price of oil remains under $100 a barrel, and despite market concerns about the potential spread of unrest to oil exporting countries in the middle east, prices have traded in a stable range in the last week. Egyptian President Hosni Mubarak's announcement that he would not seek re-election may mark a lessening of tensions in that country.

Baked into the price

Analysts also think the present scenario is baked into the current price of. At the beginning of the protests, oil prices moved sharply higher, rising nearly 10 percent. Now, the price is closer to $90 with an ample supply in the pipeline.

There were plenty of reasons to believe, as Egyptian protestors took to the streets, that we could be in for a rerun of 2008. You'll remember that oil and gasoline prices surged in the spring and summer of that year, at the slightest provocation. Unrest in Nigeria? The price of crude might surge another $10.

Before it peaked in July, a barrel of oil sold for $147 and the average price of a gallon of gas was $4.11 a gallon. The rationale for this increase was that the global economy was heating up, and anticipated demand prompted oil traders to bid up the price of futures contracts.

Phantom demand

Alas, the anticipated demand never materialized because -- in point of fact -- the global economy was not booming, but had already entered a recession. That recession was apparent for all to see by the fall of 2008, when the price of oil and gasoline plunged.

But from the beginning of the Egyptian situation, oil traders seemed to keep their composure. The reason? The economy may have made some fundamental changes in the last two years, with businesses learning how to live with expensive energy.

In an editorial this week, the Financial Times notes a dramatic rise in oil prices can be painful and destabilizing.

"But all signs are that in the developed world, this is not 1973, when soaring oil prices set off simultaneous inflationary spirals and economic contractions," the editors wrote. "This week surveys from country after country have shown manufacturers reporting robust growth in activity despite accelerating input costs."

The publication says the greatest threat oil price hikes pose to the recovery is that central bankers will "lose their nerve" and raise interest rates in reaction to oil-driven inflation.

Plenty of gas, for now

In its weekly report today, the U.S. Energy Information Administration said U.S. stockpiles of crude oil rose by 2.6 million barrels last week. The supply of refined gasoline on hand jumped by 6.2 million barrels.

But wary motorists will likely keep an eye on the gas pump for a while. So far, the view may be slightly reassuring. Despite the Egyptian turmoil, the average price of self-serve regular gas, as measured by the AAA Fuel Gauge Survey, is $3.10 a gallon, the same as it was a week ago and only three cents more than the average price a month ago.