Don’t Fret Lost Libyan Oil But Worry Plenty About Algeria

http://blogs.forbes.com/greatspeculations/2011/03/03/dont-fret-lost-libyan-oil-but-worry-plenty-about-algeria/ 

 

Posted by Addison Wiggin

 

Libyan unrest has spiked oil

Loyalists and rebels in Libya are fighting it out over the town of Brega, one of five export terminals in the east of the country. Two U.S. warships loom over the horizon in the Mediterranean.

The flow of Libyan oil to the world market — already a trickle — may soon shut down completely. West Texas Intermediate, the oil price most often cited by the media, cracked $100 yesterday, and as we write, it’s nearly $101.

Brent crude, which tracks the North Sea stuff, has already breached $116. The press are atwitter with projections of $5 gallons of gas and escalating unrest around the world.

Let’s take a deep breath. We’d rather take our time and put this mess in perspective: In terms of oil lost to the world market, this is still peanuts compared to previous supply disruptions.

As the world uses a lot more oil now than it did in, say, 1978, the impact of Libya is even more muted than the chart reveals.

Still, the crisis could spread. According to one of the oil industry’s bibles, the annual BP Statistical Review, only three OPEC members have actually grown their production during the last 10 years. One of them is Libya. The others are Kuwait and Algeria.

Algeria has been through two months of strikes, sit-ins and attempted protest marches. The government just lifted a state of emergency after 19 years. It’s anyone’s guess whether measures like those mean Algeria goes the way of Egypt or Libya.

At 2.1 million barrels per day, Algeria’s oil production is slightly greater than that of Libya’s, at 1.8 million. If Algeria goes to pot, figure double the impact. Oil could jump another $15 and oil producers in safer regions of the world will stand to benefit.

Addison Wiggin
for The Daily Reckoning

Overstating the Disruption in Libyan Oil Production originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.