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Stability in Libya may not lower gas prices at home

A pump fills up a vehicle at a Shell gas station.

Jeremy Hobson: NATO forces are reportedly bombing the compound of leader Muammar Gaddafi this morning. It is unclear if Gaddafi is actually in the compound, though. And oil traders seem to be hedging their bets on the whole Libya situation. In New York trading, oil is hovering around $83 a barrel, just about $0.50 lower today.

Juli Niemann is an analyst with Smith, Moore and Company. She's with us live now from St. Louis, as she is every Tuesday. Good morning.

Juli Niemann: Morning.

Hobson: So is the situation in Libya having any impact at all on oil prices?

Niemann: Well basically, Libya had about 1.8 million barrels a day coming out of it -- most of it went to Italy. Europe had to shift around supplies to make up for that kind of loss. If Gaddafi falls, it will be months before that oil goes back online again, and that's assuming he doesn't do a scorched earth policy like Saddam Hussein did to Kuwait in 1991. The oil companies will move back in slowly. Optimistically, it's going to be six months before they actually return online. Now in Gulf War II, Iraq still is nowhere close to the production they had before the war. So we really don't know how fast this will be coming back on.

Hobson: So it sounds like you're saying that people are not really focusing on Libya in terms of an effect on oil prices globally right now.

Niemann: And it won't be that significant, because weighing on the price of oil is really deteriorating conditions of economies worldwide. Demand's likely to climb, and that's going to put further downward pressure on prices. The world just isn't strong enough to support $100 a barrel. But there's really no relief in site for consumers

Hobson: How long does it take for whatever happens in Libya and however that impacts the price of oil to reach us at the gas pump?

Niemann: Well it's a tap out 60 days from the well head to your gasoline pump. Refiners are working at full capacity right now. The demand this summer's been fairly steady even with big swings in prices. But now we're going to be seeing a shift away from gasoline to heating oil. And that's not going to help gasoline out at all. It's going to be very high this winter to get the heating oil. So even with the economy deteriorating, prices for gasoline and heating oil still aren't cheap -- and they're not going to get cheap as we want it to be just because we have tight market volatility right now.

Hobson: Juli Niemann, analyst with Smith, Moore and Company,
thanks as always.

Niemann: You bet.

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