Europe is being caught between a rock and a hard place as unrest in the Middle East and Northern Africa begins to affect oil imports. When Libya's production was reduced by about 1 million barrels per day (bpd), Saudi Arabia was able to step up and increase production to pick up the slack. The latest sanctions on Syria won't be as easy to cover up.
The European Union recently banned imports from Syria to increase sanctions on Bashar al-Assad's repressive regime. Exports from Syria were estimated to be $4.5 billion in 2010, and 95% of crude oil exports go to EU countries.
This will have an impact on Total (NYS: TOT) and Royal Dutch Shell (NYS: RDS.A) among other companies that were planning on shipping crude from Syria this month. But with Libya a long way from increasing production to pre-revolt levels and Syrian sanctions beginning, Europe will be on the lookout for oil again.
Changing business mid-stream
Oil companies have long been perceived as being in business with shady world characters to get oil profits. BP (NYS: BP) signed an agreement with the Gaddafi regime in Libya in 2009, just two years before his country revolted against him. As a new government comes to power, it will be interesting to watch how oil contracts are handed out.
ExxonMobil (NYS: XOM) , Chesapeake (NYS: CHK) , Chevron (NYS: CVX) , and others would love to get a crack at exploration and production in Libya in a post-Gaddafi government. That may hurt BP's results in the short term, but a more transparent pro-business environment may help with the negative light oil companies are held in.
As for Syria, it could be months or years before Total and Royal Dutch Shell return to normal business there. The conflict has already been going on for months, showing no signs of ending any time soon. Sanctions may hurt the people in power, but they're also having an impact on businesses around the world. And the EU is losing some of its largest oil partners.
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At the time thisarticle was published Fool contributorTravis Hoiumdoes not have a position in any company mentioned. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdingsor follow his CAPS picks atTMFFlushDraw.Motley Fool newsletter serviceshave recommended buying shares of Total, Chevron, and Chesapeake Energy. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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