The days of sticking our heads in the sand, ignoring political and economic developments in other parts of the world, are LONG gone.

We are members of a hyper-sensitive global economy where our personal finances are often profoundly affected by developments thousands of miles away.

Last year's turmoil in Egypt, Libya and Tunisia was just the beginning. Egypt remains a volatile situation as hostility towards the U.S. grows.  Factions in Libya are still in flux. Syria has become a killing field and Iran, responsible for much of the terrorist attacks in the region, rattles its swords and continues to develop nuclear capability.   

So let's take a look at how the continuing developments in this part of the world will, likely, affect our personal finances at home.

Forewarned is forearmed!

Oil:  The ultimate reason why the Middle East matters is that this part of the world is very important with regard to oil. And, if you live in the modern world, you undoubtedly use a lot of it.

Lots of your money goes toward oil and, indirectly, most of the products you buy have an embedded oil cost either based on production or transportation.

So if the price of oil goes significantly higher, your standard of living absolutely goes lower.

Why?  Because virtually everything we buy has a connection to oil.  All the goods found at your supermarket and mall arrive by truck.  With gas prices at or near $4 a gallon, it costs the truckers more to deliver the goods and thus we are charged more.  Even your plug-in car is dependent on oil.  Much of our electricity is still generated by fossil fuel.

If the flow of oil through the Suez Canal or The Strait of Hormuz is adversely affected, the delicate supply-balance situation could presage an increase to $5 to $8 a gallon at the gas pumps since we are so dependent on oil.  Much of our electricty is still generated by fossil fuel.

Oil was the most significantly affected piece of the market as a result of the Egypt uprising. Crude oil futures topped $100 a barrel for the first time in 28 months. That could go to $200 per barrel if the Suez Canal or The Strait of Hormuz is taken out of the mix.

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