Events in Egypt (as well as in Tunisia and elsewhere in the region) tell us a lot about oil, democracy, human rights and the green economy. First I'll dispense with the proximate point that Wall Street is worried about: Egypt controls the Suez Canal. If Egypt lands in the control of ideological extremists who may choose to place political activism over profits, this could become a chokepoint for oil distribution, causing oil price increases and damaging the world economy. And, if political unrest spreads to nearby Algeria, Angola, and Nigeria, oil could rise further still. This is a double-edged sword for green companies. If an oil crisis temporarily tanks the world economy, green stocks will certainly go down along with everything else, at least in the short term. But, since an oil crisis alerts more and more people to the very fragile nature of our energy security, capital will increasingly find its way to safer energy alternatives that can be sourced renewably and domestically. So, green stocks may not fall as fast or as far during an oil shock, and they may be among the first to recover.
But in the more important longer term, emergence in the region of more fair and just regimes (e.g. increasing democratization) that help their people realize a better quality of life would be the best anti terrorism, pro growth development we could hope for. Osama bin Laden must be pissed off that the protests going on in the Middle East aren't so much anti-America-and-the-West as they are pro social justice, income equality, basic rights, and a desire to join the emerging affluent nations like China and India. But economic hardship and political repression can be more motivating than ideology. What they're protesting for is a better life. And to the extent that this can be achieved, experience tells us that terrorism will decline (if folks believe in the future they're a lot less likely to want to become human bombs), business will improve (emerging affluent populations both buy and make a lot more stuff), and the region will begin to stabilize, which is always good for markets. To the extent that political change empowers populations, the West should welcome rather than fear it.
"The higher the average global crude oil price rises, the more free speech, free press, free and fair elections, an independent judiciary, the rule of law, and independent political parties are eroded. And these negative trends are reinforced by the fact that the higher the price goes, the less petrolist leaders are sensitive to what the world thinks or says about them. Conversely, according to the First Law of Petropolitics, the lower the price of oil, the more petrolist countries are forced to move toward a political system and a society that is more transparent, more sensitive to opposition voices, and more focused on building the legal and educational structures that will maximize their people's ability, both men's and women's, to compete, start new companies, and attract investments from abroad. The lower the price of crude oil falls, the more petrolist leaders are sensitive to what outside forces think of them."
Put simply, oil-rich autocrats have the means to inflict their will upon their nation without regard to internal or external objection. Absolute power. So as long as the world is over dependant on oil, change in the Middle East will have to start, and is starting, outside the oil patch. The west should be doing all it can to make sure these transitions result in peaceful democracies that encourage the advancement of their people via education, infrastructure development and the other vectors of economic growth. And since oil rich countries do not appear to be as vulnerable to political change (absent open war; if civil unrest does manage to spread to major oil producers such as Saudi Arabia, it's that much more important to be transitioning away from oil), we need to keep pursuing goals to replace oil in every sector and industry where it is economically feasible to do so. These are our best shots at a stable, just Middle East with a growing economy that in turn will help the global economy to stabilize and prosper.
Egypt then shows us that in both short- and long-term cases it is evident that renewable, more globally distributed power sources must be a critical component of the solutions. Capital will continue to flow to the companies providing the best solutions, and the Next Economy will in aggregate continue to offer better investment returns than the legacy, business as usual economy. Mubarak now says he'll step down when his term expires in September of this year. A free and fair election to choose his successor is the ideal, if idealistic, outcome. With our long term economic interests in mind, the West should actively encourage this result.
Garvin Jabusch is the cofounder of Green Alpha Advisors, LLC and manages The Sierra Club Green Alpha Portfolio -- a unique blend of Green Alpha Advisors' Next Economy universe and the Sierra Club's proprietary green-investment guidelines.