Oil prices continue to rise — with Brent crude oil hovering around $115 a barrel — because of unrest in Libya.
Oil prices rose as Egyptian protestors began the crusade that, eventually, ousted former President Hosni Mubarak. The spike was spurred by fear that the revolt would affect the Suez Canal and SUMED pipeline, both owned by Egypt, which are critical routes for the trade of “black gold,” according to a Mar. 3 article from The Economist.
Now, battles between Muammar Qaddafi, the unpopular leader of Libya, and rebels cause the price of oil to skyrocket. Libya is the 13th largest oil producer in the world with around 1.4 million barrels exported a day, which is about 2 percent of the world’s needs, according to The Economist.
Fighting has cut crude production in Libya by as much as 1 million barrels a day, the International Energy Agency said in a March 3 Bloomberg article. Being Africa’s third-largest producer, Libya pumped 1.6 million barrels a day in January, according to Bloomberg estimates.
But, the real threat is that unrest will spread to and affect the oil kings of the Middle East.
“It’s fear and the expectation that this unrest could spread that has driven oil higher,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, according to Bloomberg.
“What our clients are interested in is this Libya plus one scenario,” said Greg Priddy, an oil analyst with Eurasia Group, in a March 2 Washington Post article. “My phone is ringing off the hook with people asking whether Algeria, Oman and Saudi Arabia and Iran could be next.”