21st February 2011
The Guardian reported that the anti-government protests of Libya, a member of the oil cartel Opec, and other Middle Eastern countries had fuelled fears of disruption to supplies and hence a price rise.
BP has suspended preparations for exploratory drilling for oil and gas in western Libya as Libyan leader Muammar Gaddafi's sons warned the country could descend into civil war as the regime tried to halt the popular uprising with a bloody crackdown.
Protests broke out in the capital Tripoli for the first time following days of unrest in Benghazi, the second largest city.
Libya exports 1.1m barrels of oil a day and has proven oil reserves of 44bn barrels, the largest in Africa, according to the International Energy Agency.
On Citywire, Rob Mackinlay writes that the turmoil has sent gold and oil prices soaring.
Gold prices surged to $1,402 an ounce, the highest since 4 January, while forward-dated West Texas Intermediate oil prices shot up 3.33% to $89.07 and forward-dated Brent crude oil advanced 1.85% to $104.44 a barrel. The FTSE 100 was down 18 points at 6,064 after making a positive start earlier in the morning.
Analysts at UBS said a $10 hike in the oil price would push up European inflation by 0.2% over 1 year and 0.1% over two years.
Guardian readers felt that the Libyan crisis was an excuse for speculators to put up oil prices.
Halo572 added: "Hang on a minute, this isn't one of those 'one off inflationary factors' Mervyn keeps using as an excuse of why he is doing nothing to attempt to control inflation is it?
Oh Mervyn, it just never ends does it? Just problem after problem."
ChrisWoods wrote: "The oil price seems to simply continue its constant rise no matter what the circumstances. Dictator takes power, oil price rises on forecourt.
"Democracy takes power from dictator, oil price rises on forecourt.
OPEC pumps more oil, oil price rises on forecourt.
OPEC pumps less oil, oil price rises on forecourt.
Oil producers underestimate oil reserves, oil price rises on forecourt.
Oil producers overestimate oil reserves, oil price rises on forecourt.
And the best of all, during the height of the recession oil price fell to some 40-50 USD per barrel (half what it is now) but oil price on forecourt hardly fell at all.
The list is endless, the circumstances the same in that the oil market just loves uncertainty to keep the speculators in business, keep the prices rising no matter what. This is why there is more money in oil speculation that actual real oil in circulation."
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