Turmoil in Libya has put the global oil market into a tizzy this week, with Mu’amar Al-Qaddafi and tribal leaders both threatening to blow up pipelines and foreign oil workers fleeing the country.
But many analysts said Libya by itself can’t strangle the global supply and that the chaos that has gripped the country is unlikely to be repeated anywhere else in the Middle East, which accounts more than one-third of the world’s oil reserves.
“The direct impact of what is happening in Libya is pretty small, even though Libya is an oil exporter,” Julian Jessop, chief international economist, Capital Economics in London, told The Media Line. He said he was skeptical unrest would spread to other oil exporters. “The most dangerous domino has already fallen, which is Libya.”
Oil prices have been climbing as unrest flares up in one Middle Eastern country after another. But until they reached Libya a week ago, the mass protests had been confined to the region’s oil-poor nations – Tunisia, Egypt, Yemen and Bahrain. On Tuesday, the price of Brent crude – a benchmark for petroleum prices – reached $108.57 a barrel, its highest in two years. On Wednesday, it pulled back slightly but remained above $107.
Libya accounts for just 2.3% of global oil production, or about 1.6 million barrels a day, which makes it the second-smallest producer in the Middle East. But events in Libya have served to sow panic in global markets. Among major oil producers, aside from Libya the only one to have been hit by unrest is neighboring Algeria. But Mohammed El-Katiri, North Africa analyst for the Eurasia Group, said he was optimistic that Algeria would not follow the same chaotic trajectory as Libya.
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