Support Marketplace

Libya developments ease oil prices

A picture shows the Zawiya oil refinery, some 40 kms west of Tripoli, on Aug. 19, 2011, after Libyan rebels pushing to cut off Tripoli took complete control of the key oil refinery that is the only source of fuel to the capital, its manager said.

Bob Moon: The impending end of the six-month-long conflict in Libya is likely to reduce the price of oil around the world. By most estimates, Libya can resume pumping close to 2 percent of the world's daily supply of oil within a year or two.

But right away, Marketplace's John Dimsdale reports the end of the Gaddafi regime is expected to give a psychological boost to world oil markets.


John Dimsdale: What oil markets missed most during months of fighting in Libya wasn't so much quantity, as quality.

John Kingston: They produce some of the highest quality crude in the world.

John Kingston with the energy service company Platts says Libyan oil is light and sweet -- easy to refine. And he says the rebels who have ousted Muammar Gaddafi are promising to get the oil pumps working again as soon as possible.

Kingston: They made very clear all along that if they were to take power, they would respect the contracts that the Gaddafi government had signed with various western oil companies to explore. These companies know they can go right back in and get to work.

Another reason for a dramatic short-term psychological boost to oil markets is the speed of the rebel takeover, says Geoff Porter of North Africa Risk Consulting.

Geoff Porter: A lot of oil analysts hadn't expected any positive news to come out of Libya more broadly until after Labor Day. And that would postpone any return of production until the middle of 2012. But now there's a possibility Libya may be able to start domestic production on its own before the end of the year.

Still, Porter expects Libya's psychological effects on oil prices will be short-lived. The global economy's performance will have a more lasting influence. Faster growth means higher demand. And since supplies are tight -- even with Libya's contribution -- that means higher prices.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...