Libya Faces Long Wait to Resume Oil Exports -BP Economist
Stephen Bell, The Wall Street Journal, April 11, 2011
It may take years for war-torn Libya to resume significant oil exports, placing further upward pressure on already high oil prices, a leading industry economist said Monday.
The cessation of exports from Libya is a “dangerous situation” for the oil market, which is already struggling to keep up with demand growth for the fuel, BP PLC (BP) Group Chief Economist Christof Ruhl said.
“For all intents and purposes Libyan exports–1.3 million barrels per day–are gone,” he told reporters on the sidelines of an industry conference.
Other OPEC producers, such as Saudi Arabia, have tried to compensate for the Libyan outage, but Ruhl doesn’t believe the “current increases are enough” to cover recent demand growth.
“So you have an upwards drift on (oil) prices,” he said.
While it is difficult to gauge the damage to Libya’s infrastructure from the current unrest, historically, it is surprising how long production can take to resume in countries affected by civil unrest, he said.
“It always takes years, not months, to come back.”
Libya will be hit by uncoordinated shutdowns, infrastructure damage and the fleeing of oil workers from the country, he said. “There are lots of reasons to be wary.”
Ruhl also said the global economy faces a “toxic” situation this year due to record-high oil prices combined with the start of a tightening cycle in interest rates.
“The combination is troublesome. and it is more troublesome for the U.S. than most other countries because they are more sensitive to oil price increases,” he said.
Benchmark light, sweet crude for May delivery on the New York Mercantile Exchange was down 31 cents to $112.48 in Asian trade, after soaring to its highest level in more than two years in U.S. trade Friday.