Will military action in Libya cripple oil production for long term?

People stand near the rubble after a missile totally destroyed an administrative building of Libyan leader Moamer Kadhafi's residence in Tripoli.

ADRIENE HILL: The price of oil has jumped more than $2 a barrel since air and missile strikes began in Libya over the weekend.

As Marketplace's Stephen Beard reports from London, fears are growing that the outage of Libyan oil may last longer than expected.


STEPHEN BEARD: Since the revolt against the Libyan regime broke out, the country's oil production has dwindled to lees than a quarter of its usual output. Traders believe it could now fall further and even stop completely. The air and missile strikes have raised two concerns: that oil installations may be damaged by accident or that Gaddafi could retaliate by blowing up foreign owned oil facilities.

Simon Wardell is an energy analyst with IHS Global Insight. He says traders are now bracing for worse news.

SIMON WARDELL: Certainly a few months of disruptions were priced in. Now I think people are looking a bit beyond that and perhaps even as long as a year. I think markets are just reacting to what they see as the potential risks of a much longer disruption.

Nevertheless the oil cartel, OPEC says that other producers like Saudi Arabia and Kuwait are pumping easily enough extra crude to make up for the shortfall from Libya.

In London this is Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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