Gadhafi’s ousting could translate to lower gas prices

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The end of Gadhafi's rule could translate into more oil supplies and lower prices. Image: ezioman/Flickr/CC BY

Sunday’s assault on Tripoli and the subsequent overthrow of Libyan dictator Moammar Gadhafi could translate into lower gas prices here and abroad in the months to come. The extent of the rebel victory, however, remains uncertain.

Prices could drop if supply restored

The oil supply in Europe, which provides about half of the U.S.’s 40 million gallon daily import, was disrupted when the civil conflict broke out in Libya 6 months ago. Analysts say that if the European supply is restored in the wake of the regime change, U.S. motorists could be seeing a drop of 20 cents to 25 cents a gallon at the pump over the next few months.

Andrew Lipow, CEO of Lipow Oil Associates LLC, said Tuesday:

“Libyan oil production may begin to return in the next few months, and oil prices and refiners in Europe will have a lower raw material cost.”

Prices up 40 cents since uprising

Since the Libyan uprising began last February, U.S. at-pump fuel prices have risen an average of 40 cents a gallon. Before the unrest, the desert nation supplied about 1.6 million barrels of oil a day, or roughly 2 percent of the world’s supply.

Relatively easy to restore production

Since the Libyan petroleum installations were not a target of the warring rebels, it is believed that they remain basically intact and relatively easy to get back up and running. And it is in the interest of the new regime to do so.

Energy consultant Cameron Hanover explained:

“With the new regime entirely dependent on oil revenues, the momentum to get facilities operational will be overwhelming. … In order for this new democracy to attract enough support, it will need to get oil flowing right away.”

Others disagree

Others, however, remain less optimistic. Confusion lingers as to the extent of the rebel victory. Seif al-Islam, Gadhafi’s son and heir-apparent, previously reported to have been captured by rebels, reemerged in Tripoli Tuesday. The successor-in-waiting defiantly declared that his father was still in control of the Libyan government.

Prices up in London

In the wake of this latest development, crude oil prices rose in London from $108.36 to $108.65 a barrel. Time will tell if this is based on a temporary panic or is the portent of a more lasting trouble.


Christian Science Monitor
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