20110316 libya gaddafi 54
Brandishing images of their leader, forces loyal to Muammar Gaddafi celebrated on March 12, 2011, after retaking the eastern Libyan oil town of Ras Lanuf from rebel forces fighting to topple the regime since February 15. - 

Kai Ryssdal: The United Nations is still working out what to do about Libya. The Security Council has yet to make up its mind on a no-fly zone. But events on the ground may make that decision somewhat irrelevant.

Forces loyal to Muammar Gaddafi seem to be gaining the upper hand. They're pushing farther east toward the rebel capital of Benghazi. So what happens if Gaddafi stays in power? What about oil, and what about sanctions?

Marketplace's Jeff Tyler reports.

Jeff Tyler: The rebels did briefly control some oil facilities along the Mediterranean coast, east of Tripoli. Now --

Tom Wallin: Most of the export facilities are back in the hands of the government. But the fields are still in the hands of the rebels.

That's Tom Wallin, president of Energy Intelligence. He says many foreign workers have fled the country for their own safety. And the political uncertainty has left international oil companies unsure about whom they should be dealing with.

Wallin: A lot of those relationships have been thrown into disarray. And so it's not clear exactly who owns the oil, who can sell the oil. If you buy the oil, who are you paying?

So far, most of the sanctions have focused on the Gaddafi's assets. But there is pressure to expand sanctions to target oil. Again, Tom Wallin.

Wallin: The U.S. government has placed sanctions on the national oil company. And as of yet, the European Union has not. But they're moving to do something similar.

If the international community does boycott Libyan oil, would it be effective? UC San Diego economist James Hamilton says no.

James Hamilton: Where are we going to go instead? The wonderful regimes of Venezuela or Iran? Even at the tightest of a very significant blockade of Iraq oil, Saddam was still able to sell his product. I think somebody is going to buy the Libyan oil.

Gaddafi's regime is completely dependent on oil money. It financed this war. And if he faces a boycott, Gaddafi would likely offer bargain-basement oil on the black market.

I'm Jeff Tyler for Marketplace.

Follow Jeff Tyler at @JeffMarketplace