Raymond James adds touch of common sense to the debate over Libya

By Eric Watkins
The violence now overtaking Libya has had repercussions throughout the world, not least on the oil and gas industry, as wonder grows over the possible outcomes in the North African country. At the same time, a certain degree of panic seems to be taking hold here and there, as mere possibilities begin to take on more weight than they deserve.

In the midst of a growing panic, though, there are some sane voices resounding through the tumult, and Raymond James & Associates has emerged as one of them. Indeed, a research note produced on Feb. 28 is a model that other analysts might want to replicate as they ponder the implications of the present turmoil in Libya -- and beyond.

Perhaps the best point about the Raymond James analysis is the clarity of vision presented by the analyst. That’s especially evident in the way he has viewed the Libyan crisis which “currently presents the most serious geopolitical risk to global oil supply in recent memory.”

Yet the analyst is no less clear about what’s really worrying people. “With WTI crude prices at the $100/bbl mark for the first time since 2008, the oil market is fearful not just of continued Libyan production disruptions but the risk of them spreading to Algeria and, in an ‘Armageddon scenario,’ the Arabian Peninsula.”

Armageddon? Well, congratulations to the Raymond James analysts for stating clearly what the fears are, while also putting them into perspective. And that perspective is down to earth: “All in all, we wouldn't lose sleep over this extreme-case scenario, but it would seem that $100+ WTI (add ten bucks for Brent) is here to stay, courtesy of the Middle East.”

A good night’s sleep. Isn’t that what Saudi Arabia’s oil minister urged traders to enjoy last week after saying that OPEC is in a position to cover any losses stemming from problems in Libya? Well, it seems that Raymond James analysts have taken that advice to heart.

More to the point, members of the Raymond James team have put their thinking caps on to make some very crucial distinctions between countries in North Africa that have experienced the outbreak of violence and those in the Arabian Peninsula that have not. Indeed, it is precisely this analysis which puts Raymond James analysts head and shoulders above many others these days.

Here’s a taste: “While North African countries and those on the Arabian Peninsula share a common language and some other similarities, they are extremely different societies. An obvious difference is the level of economic development...”

The analyst then compares Egypt’s capita GDP of $2,800 with Saudi Arabia’s per capita GDP of $16,600, and makes the crucial observation that in Saudi Arabia there is “nowhere near” the same sense of economic desperation as in North Africa, “since the government funds a generous social safety net out of its oil proceeds.”

There’s a lot to be said for common sense, and in this analysis Raymond James & Associates have shown an uncommon amount of common sense for a day and age that is more characterized by thoughtless panic.

Contact Eric Watkins at hippalus@yahoo.com
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