Thoughts on Revolution and Oil Disruption

Revolution is sweeping through North Africa and the Middle East.  The governments facing this spontaneous uprising are universally totalitarian.  Some have had good relations with the United States and some have not.  No one knows if the new governments will be more democratic or less, or if more democratic regimes will be less friendly to the United State and our allies.  Assume the worst, that anti-American, totalitarian, radicalized pro-Iranian governments replace current regimes.  What will this mean for oil output and prices?

I believe that after a temporary spike due to the fear of disruption of or actual disruption of supplies, output and production will resort to their pre-revolution trend.  My conclusion is based on two assumptions.  First, like their predecessors, the new regimes will attempt to maximize oil revenue.  This means setting a monopoly price through OPEC or some similar cartel.  These countries are poor, and long-run reduction of production below the optimal cartel price would reduce economic activity leading to greater discontent.  The new regimes would face counter revolution elements in their own government willing to supply oil to the rest of the world and these challengers would be able to promise bigger rewards to backers than the current regime based on increased oil production.  Second, although the new regimes would set prices through a cartel, they would have as much incentive to cheat on cartel prices as those they replace, making it difficult for the cartel to maintain production quotas.  In short, the revolutionary frenzy may be bad for the U.S. diplomatically, it will not mean a great deal economically.