Libya Turns Oil Rally From Nuisance To Threat For World Economy – WSJ.com

Energy , Energy Mar 09, 2011 No Comments

Oil WellsThe loss of Libya’s supplies has transformed the oil rally, previously seen as a mild obstacle, into a potent threat to the global economy.

Brent oil futures have shot up nearly $15 in just three weeks, ever since antigovernment protests in Libya first posed a threat to oil exports. Libya’s production has dropped by about one million barrels, and the market is bracing for the possibility of similar disruptions elsewhere in the region. Some analysts are predicting prices as high as $200 a barrel if unrest reaches Saudi Arabia, the world’s biggest oil exporter.

Oil prices had risen by a similar amount in the three months before Libya’s protests began, largely on greater consumption from the recovering U.S. economy and fast-growing emerging markets. But it is only the latest rise that has economists and oil market analysts worried.

“There is a difference between a market driven by economic growth, which is how we got to $100 a barrel, and one driven by supply dislocation,” said Lawrence Eagles, head of commodities strategy at J.P. Morgan.

Prices of around $100 a barrel, or roughly where Brent traded before Libya’s protests began, are justified by a strong global economy, according to analysts at Deutsche Bank. But if oil prices stay near today’s price at $110 a barrel, it would shave 0.4% off global gross domestic product growth, the bank said. If prices spike to $150, the rate of global economic growth would drop 2%.

via Libya Turns Oil Rally From Nuisance To Threat For World Economy – WSJ.com.

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Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website Propurchaser.com.