Oil prices Head Up - Gasoline Too!
Oil prices are settling down. They spiked up a couple of weeks ago with the Libyan riots, with prices jumping from the mid-80's all the way up to almost 100. Then oil prices broke through 100. For a few days, it created a lot of buzz. Then prices settled. Really? Isn't it almost $15/barrel higher than it was before the Libyan mess? That's "settled"?
And what about Libya? Have things been resolved there? I don't think so. Even without much reliable media access, available evidence seems to indicate that things continue to unravel. In fact, NATO countries are now establishing a "no fly" zone - and enforcing that with fighter jets.
And what's this? It seems that while original reports had NATO sending ships to the part of the Mediterranean near Libya, it turns out that the US, UK and France took the lead in enforcing the "no-fly." On top of this, other NATO members like Germany and Italy are complaining about who's leading the charge. Everyone's bickering, even as pilots are attacking and put in harms way.
So given the fact that Libya is the 12th largest exporter of oil (compare: Saudi Arabia exports over 7 billion barrels per day vs. Libya's 1.2 billion) you've got to believe that the impact on oil prices may continue. Factor in unrest spreading to other oil producers - even, heaven help us, Saudi Arabia - and we may be in for considerable increases in the price of oil.
Of course, the opposition in Libya claims that they will continue Libyan exports at current levels if they prevail. Don't count on it. I you remember, Iraq was going to not only continue exporting oil in spite of the war, it was going to increase production. Iraq does export, but what happened to those increases? The reality is that leaders say whatever suits their purposes, and the Libyan opposition doesn't want to spook the developed world into thinking they won't be able to get oil.
Anyway, I'm not saying that oil's going to the moon or anything. It's just that the spreading riots will disrupt oil exports. We just don't know to what degree.
Well, we can always look to the past and hope that oil follows the typical pattern of commodities. When supply is squeezed and demand stays the same, the price goes up. At some point, because prices are up and therefore profits go up, producers manage to "make" more oil - either by pumping more out of the ground or by utilizing some of the oil that sits at sea in tankers waiting to take advantage of price hikes. After a while, production overshoots the current demand and the oversupply causes the price to go down. Let's hope.
So no reason to panic, but I wouldn't just assume the typical scenario will play out in the short term. If these riots really result in significant political change, we could be in for unstable (read "rising") oil prices for some time.
One thing I do is I keep my cars' tanks topped all the time. Never let your gas tank go below half. The point of that isn't only that gas prices may continue up, but that there could conceivably be shortages at some point - if things really get hot in the Middle East and prices get out of control. It's just a prudent measure you can take.
And what about Libya? Have things been resolved there? I don't think so. Even without much reliable media access, available evidence seems to indicate that things continue to unravel. In fact, NATO countries are now establishing a "no fly" zone - and enforcing that with fighter jets.
And what's this? It seems that while original reports had NATO sending ships to the part of the Mediterranean near Libya, it turns out that the US, UK and France took the lead in enforcing the "no-fly." On top of this, other NATO members like Germany and Italy are complaining about who's leading the charge. Everyone's bickering, even as pilots are attacking and put in harms way.
So given the fact that Libya is the 12th largest exporter of oil (compare: Saudi Arabia exports over 7 billion barrels per day vs. Libya's 1.2 billion) you've got to believe that the impact on oil prices may continue. Factor in unrest spreading to other oil producers - even, heaven help us, Saudi Arabia - and we may be in for considerable increases in the price of oil.
Of course, the opposition in Libya claims that they will continue Libyan exports at current levels if they prevail. Don't count on it. I you remember, Iraq was going to not only continue exporting oil in spite of the war, it was going to increase production. Iraq does export, but what happened to those increases? The reality is that leaders say whatever suits their purposes, and the Libyan opposition doesn't want to spook the developed world into thinking they won't be able to get oil.
Anyway, I'm not saying that oil's going to the moon or anything. It's just that the spreading riots will disrupt oil exports. We just don't know to what degree.
Well, we can always look to the past and hope that oil follows the typical pattern of commodities. When supply is squeezed and demand stays the same, the price goes up. At some point, because prices are up and therefore profits go up, producers manage to "make" more oil - either by pumping more out of the ground or by utilizing some of the oil that sits at sea in tankers waiting to take advantage of price hikes. After a while, production overshoots the current demand and the oversupply causes the price to go down. Let's hope.
So no reason to panic, but I wouldn't just assume the typical scenario will play out in the short term. If these riots really result in significant political change, we could be in for unstable (read "rising") oil prices for some time.
One thing I do is I keep my cars' tanks topped all the time. Never let your gas tank go below half. The point of that isn't only that gas prices may continue up, but that there could conceivably be shortages at some point - if things really get hot in the Middle East and prices get out of control. It's just a prudent measure you can take.
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