The revolutionary unrest in Libya is causing crude oil prices to rise dramatically. By one estimate, prices are up more than 20 percent over the three weeks since the turmoil began. The impact of increasing oil prices is felt by consumers of all kinds—especially at the gasoline pump. If prices were to approach the record levels of 2008, the inflationary ripple effects could put brakes on the U.S. economic recovery. 0il is vital to production of chemicals and plastics, and higher transportation costs affect the price of practically everything. Oil traders expect prolonged fighting in Libya will keep upward pressure on prices. And with foreign media banned from the country, it is difficult to know whether rebels or forces loyal to Col. Muammar el-Qaddafi are in control of Libya’s oil facilities.
Most of Libya’s crude oil production (about 1.8 million barrels/day) is shut down because of the conflict. The interruption in Libya’s production and exports could last longer than expected if infrastructure suffers significant damage. Already, thousands of foreign oil workers are fleeing the country. Observers worry that the upheaval in the Arab world might spread to other oil-producing countries, especially Saudi Arabia, the world’s leading crude exporter.
Speculation is driving the spike in oil prices more than loss of supply. So far, the drop in Libyan exports has been made up for by increased production by Saudi Arabia. But the fears and expectations of speculators have a more immediate impact on prices than does the actual amount of oil available to global markets. In addition, Libya’s high-quality, low-sulfur crude is highly sought after by refineries.
Related Links
- Crisis in Libya Raises Fears of Skyrocketing Oil Prices Causing Pain at the Pump
Fox News coverage at the time of the outbreak of Libyan protests; includes video.
(Source: Fox News, February 22, 2011) - Why Libya’s Uprising Is Bad for the World Economy
This article analyzes the global impact of the crisis in Libya.
(Source: Time.com, February 24, 2011) - Euroview: Oil Prices Converge on Libya Crisis
This video from the Wall Street Journal discusses the different price indexes for crude oil and the impact of the unrest in Libya.
(Source: Wall Street Journal, March 8, 2011)
How does this relate at all to saudi arabia?
Honestly?????? We at least have the government conlrotling these prices, why we have to put up with this when those in government officer are not affected by this. I am really angry now more than ever as it is now going into 2 mths I am unemployed and I cannot believe how difficult it is to get a job. We have the sunshine list out yesterday, gas prices up by almost .05cents, grocery and the new election which will cost us more for these idiots to sling mud at each other not acheiving anything at all. Can you tell I am angry???