Oil Industry Braces for Fallout From Libya
February 21, 2011
Oil consuming nations have emergency reserves they can use to stabilize markets in case the violence in Libya and the wider Middle East escalates and crimps production, officials said, reports the Associated Press. Oil prices jumped because of the ongoing turmoil in Libya, where Moammar Gadhafi''s son, Seif al-Islam Gadhafi, warned protesters that they risked igniting a civil war in which Libya''s oil wealth "will be burned." By early afternoon in Europe, benchmark crude for March delivery was up $3.10 to $89.30. Libya alone exports at least 1 million barrels of crude a day. Even more worrying for markets is potential contagion, or the spreading of the political violence to other countries in the Organization of Petroleum Exporting Countries. David Fyfe, head of the oil industry and markets division at the International Energy Agency, stressed that the IEA member countries reserves of 1.6 billion barrels of oil -- equivalent to some 4 million barrels per day for the next 12 months -- that could be brought onto the market if necessary. The IEA''s 28 members are mainly oil consuming industrial nations such as the United States, Japan, Britain and Germany. The IEA has used government stocks to steady the oil market only twice before, during the Gulf War in 1991 and after Hurricane Katrina hit the Gulf of Mexico in 2005. Fyfe said the situation in the Middle East and North Africa was "of real concern," noting that the region accounts for 60 percent of global oil resources and 40 percent of global gas resources.