What have you always wondered about the economy? Tell Us
Discontent in the Middle East

Juli Niemann: Libya’s impact on oil prices

Jeremy Hobson Feb 22, 2011
HTML EMBED:
COPY
Discontent in the Middle East

Juli Niemann: Libya’s impact on oil prices

Jeremy Hobson Feb 22, 2011
HTML EMBED:
COPY

TEXT OF STORY

JEREMY HOBSON: Now let’s get to the situation in Libya and the effect it’s having on oil prices. U.S. crude is up almost $7 this morning at about $96 a barrel. That’s a two-and-a-half year high.

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.

JULI NIEMANN: Morning Jeremy.

HOBSON: So it seemed like oil markets were relaxing a little bit after Egypt’s regime collapsed. Why is what’s happening in Libya so concerning?

NIEMANN: Well the market’s had been blowing off the revolts today. Another day, another despot downed. But you’re looking at this one is an OPEC producer. About 2 million barrels a day is what on average they’ve been producing. Which is not a huge producer, but operators are shutting down and evacuating, and a very slow restart time. you just don’t go back in and throw on the switches again. So that production is going to be out. Now short run — Saudi Arabia can pick it up here. There are other OPEC producers that can’t pick it up, but the high implication is that there’s more unrest headed into the Middle East, and that’s where you’re seeing prices really shooting up now. Supplies security is being factored in.

HOBSON: OK now Juli, I don’t usually drive because I live here in New York, but I was at the pump this weekend here in the northeast and it was $3.21 a gallon for the cheap gas, which seemed like a lot to me. At what point will what’s happening in Libya send prices at the pump here in the U.S. higher?

NIEMANN: You’re going to be seeing it immediately, simply because producers were swallowing it to some extend in terms of commodity prices. Station operators operate with a weekly load of gasoline with money from last week. They know prices are going up, they’re going to have t hike their prices now to pay for what’s coming because they’re operating on a shoe string. So you’re going to see it at the pump almost immediately.

HOBSON: Juli, what’s the price of a gallon of gas out there in St. Louis?

NIEMANN: Right now we’re looking at about $3 going up to $3.15 but it is headed higher. Definitely. We have a lot of refineries here.

HOBSON: Juli Niemann, analyst at Smith, Moore and Company, thanks so much.

NIEMANN: You bet.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.