Loyalists and rebels in Libya are fighting it out over the town of Brega. That’s one of five export terminals in the east of the country. Two US 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.
But 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’s leadership,” says The Associated Press this morning, “riddled by corruption and at the mercy of the army, is sitting in a circle of fire, with a restive populace at home and pro-democracy uprisings in neighboring Tunisia and Libya that are shaking the Arab world to the core.”
There’ve been 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 Wigginfor The Daily Reckoning
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
Interesting column, however, it is time to panic for the US people, as our costs are rising, our pay is stagnating. The so called recovery that has been going on for two years really hasn’t panned out, and people still working don’t have the extra money to buy gas to commute to their work. It also makes you wonder why, if the crisis isn’t so great, oil is spiking like crazy, and is nearly as high as it was in 2008 before the big bust up.
It is always good to put things in perspective although, this time is slightly different.
First of all because the actual buffer available from various others countries is very much smaller than used to be. Second, because the buffer is mostly coming from Saoudi Arabia which and made of sour and heavy crude, while lost production is primarily light and sweet. Third because the economy is in a very bad shape…
Luckily, currently, we enter in europe into the refinery turnaround season which cuts total crude intake from 900 kbd ot up to 1.600 kbd and this till mid april.
The current situation with WTI is an aberration. More analyst are forecasting lower WTI versus brent based on silly thinking. WTI is a very good crude which can be bought at a discount to FOB Persian Gulf crude, directly inland USA.
Who can believe WTI will remain discounted till december 2014.
Thanks for your always interesting and educational articles.
Golly Gee. I sure am glad it couldn’t be speculators driving up the price, now could it?
The U.S., Russia, the EU and Ukraine all met in Geneva, where all sides agreed to halt all violence and provocations in Ukraine. But the news media are still taking an antagonistic stance toward Vladimir Putin and Russia. What gives? Today, Marc Faber explains the hypocrisy behind U.S. foreign policy... and the BS the news media are pushing about it...
One of the world's foremost innovators - Wired Magazine's former editor-in-chief, Chris Anderson - talks about the future of innovation, his company 3D Robotics and how he built the world's first Lego-operated drone at his dining room table.
Politicians talk about the uninsured. Special interests argue on behalf of those with pre-existing conditions. But why is no one wondering how doctors are affected by Obamacare? They're the ones on the front lines dealing directly with new patients, as well as the red tape that makes bureaucracies go round. Loren Heal explores further...
Since the beginning of March, hedge funds have been steadily moving out of growth stocks. So it's not coincidence this sector has fallen in tandem. But the question is, where is the "smart money" headed now? Greg Guenthner examines the current, decidedly "unsexy" trend in the market. Read on...
Thanks in part to Michael Lewis's book Flash Boys, High Frequency Trading (HFT) is front and center for this round of the news cycle. Today, John Rubino continues the discussion, explaing why HFT is so dangerous, and how public awareness of it is affecting something called the "trust horizon." Read on...
As the U.S. "shale gale" nears its 10th birthday, it appears the America energy renaissance has outlived its critics. Still, it's natural to wonder whether all the big gains are behind us. Today, Matt Insley reveals the newest shale hotspot, and explains why there's still plenty of opportunity left in the U.S. energy boom. Read on...
U2 frontman and self-proclaimed demigod Bono held a benefit concert in an Iowa cornfield on Tuesday, in an attempt to help those poor investors who were devastated by last month’s Mt. Gox bankruptcy...