As political unrest and violence in Libya escalates, oil prices have reached the highest level in over two years. Although just a small portion of Libya’s oil production seems to have been affected, analysts worry that revolts will spread to key oil producing nations such as Iran.
Within a few days, average regular gas prices are expected to rise to $3.25 and senior analyst at energy tracker DTN states, “If this thing escalates…$5 gas isn’t out of the question.”
Presently, Libya is in possession of the most oil reserves in Africa and acts as the world’s 15th largest crude exporter–exporting 1.2 million barrels of oil per day. Business pulled from Libya could easily be picked up by other big-time oil producers like Saudi Arabia.
Gas prices, although 20% higher than last year, are still lower than the record high average set in July 2008.
Tom Kloza, chief analyst at the Oil Price Informative service, assumes that by Memorial Day Weekend, gas prices will be set at $3.75, but he explains that “If prices move too high consumers will cut back, and prices will fall. It really alters consumer psychology.”
Although these numbers are mere predictions, it is safe to say that if this continues to be a problem, the economic impact could be huge.