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A devastating Japanese tsunami, the Arab Spring uprising in the Middle East and dramatic developments in US crude production helped characterize oil markets in 2011.

The US Energy Information Administration released its 2011 in Review yesterday, a summary of the key developments that affected crude and heating oil supply and demand last year.

The earthquake and tsunami that devastated Japan in March knocked out nuclear power plants and initially cut oil demand, sending prices lower, as the Japanese economy faltered. However Japanese oil demand rebounded as Japan sought alternative energy supplies to rebuild.

Transportation bottlenecks in the US caused massive backlogs of crude oil at inland US markets, largely due to rising oil production in the US and Canada. This triggered a record price spread between the US benchmark West Texas Crude and European benchmark North Sea Brent. The two oil grades have historically traded within similar ranges and edged closer towards year’s end.

Dramatic developments in shale oil production, including the proliferation of hydraulic fracturing and horizontal drilling, helped boost oil and natural gas production in the US to record levels. Similar advances in Canada and Brazil mean the Americas are edging closer to oil “self-sufficiency”, the EIA said.

“The result is that refined product trade flows are being redrawn. In 2011, the United States shifted to net product exporter status for the first time since at least 1949.”

The Arab Spring uprising sent political shockwaves around the world, as oil-producing nations in the Middle East wrestled with internal pro-democracy tensions, raising the treat of global oil supply disruptions.

A bloody civil war in Libya to overthrow dictator Colonel Muammar Gaddafi sent oil prices skyrocketing when the North African nation’s 1.5 million daily barrels of oil supply was cut off.

The subsequent failure of OPEC oil producers in June to agree to a production increase triggered a strategic oil reserve release of 60 million barrels coordinated by the International Energy Agency – just the third such release in history. Debate raged about whether this helped bring prices down or whether the prospect of less crude in reserve for future supply shocks had in fact caused prices to rise even further.

Looking ahead, there are fears Middle Eastern regimes that have launched massive spending programs in the past year to counter pro-democracy insurgency will favor higher oil prices during 2012 to pay balance their books.

And developments in Iran, which faces more international sanctions in response to its apparent nuclear weapons program, threatens to to send world oil prices higher, having already breached the $100 a barrel mark this week.

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