Unrest in Libya prompts spike in oil prices
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JEREMY HOBSON: The oil company Shell has moved all of its foreign workers out of Libya, following a similar move by BP. And the turmoil in Libya, which is a major oil producing nation, continues to roil global markets.
We’ll get to the numbers in a moment. But first, let’s go live to Marketplace’s Stephen Beard in London for more. Good morning.
STEPHEN BEARD: Hello Jeremy.
HOBSON: So tell us why investors are so concerned about what’s going on right now in Libya.
BEARD: Well, as you say, Libya is a big oil and gas producer — up to 2 million barrels a day. And the fear is that there may be not just a temporary interruption in that flow of oil and gas. The worry is that a new government might come to power in Libya which is very nationalistic and might kick out Western oil companies, and that could lead to a longer lasting fall in supply, and that could push oil prices even higher.
HOBSON: And Stephen at what point do we have to worry about higher oil prices actually slowing down the global economic recovery?
BEARD: Well, not yet. But there’s a cumulative affect here. We’ve had a whole series of supposedly temporary hikes in the price of oil and other commodities. And economists are worrying that there will come a point when companies will decide these are not temporary after all and they’ll push up their prices to cover their costs.
Here’s professor Dominic Swords, of the Henley Business School.
DOMINIC SWORDS: The longer and more spikes and temporary blips we have, I think our worry is that the expectations of continued inflation, of commodity prices as well as oil prices, gets built into the system.
And he say’s there will come a point in the not too distant future perhaps, when central banks will have to take notice and have to curb that inflation by pushing up the cost of borrowing. And that’s when they economic recovery will be in greatest danger.
HOBSON: Marketplace’s Stephen Beard in London, thanks Stephen.
BEARD: OK Jeremy.
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