Why the Disruption of Libyan Oil Has Led to a Price Spike

[groovedaddy]

HOUSTON — Crude oil prices reached $100 a barrel in the United States on Wednesday, the highest price in more than two years, as Middle East oil flows were interrupted this week for the first time since the region’s turmoil began.

Multinational oil companies have curtailed production in Libya as protesters engage in violent confrontation with the government of Col. Muammar el-Qaddafi. Analysts estimate that as many as a million barrels of Libyan oil a day have been removed from world markets in recent days, and investors fear that more oil production could be disrupted if the unrest spreads to other crucial producing nations, like Algeria.

More broadly, economists are concerned that if oil prices stay high this year, they could slow the already fragile global economic recovery. As a general rule of thumb, every $10 increase in the price of a barrel of oil reduces the growth of the gross domestic product by half a percentage point within two years.

Libya produces less than 2 percent of the world’s oil, and exports little to the United States. But the high quality of its reserves magnifies its importance in world markets.

http://www.nytimes.com/2011/02/24/business/energy-environment/24oil.html?nl=todaysheadlines&emc=tha25