The NYT reports:
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.
James Hamilton looks at the economic consequences:
My bottom line is that events as they have unfolded so far are not in the same ballpark as the major historical oil supply disruptions, and are unlikely to produce big enough economic multipliers that they could precipitate a new economic downturn. They might shave a half percent off annual GDP growth, but I don't anticipate a whole lot worse than that.
The conditions that created the current upheavals can only worsen. Rising oil prices are bound to stifle tourism and foreign investment in the Middle East and a looming global food shortage seems likely to make life even tougher for the growing ranks of un- or underemployed poor. Governments that have massive oil revenues can afford to buy, or try to buy, the acquiescence of their peoples, but adequate food supplies could turn out to be a different matter. As we saw with Russia last summer, massive crop failures can easily shut down food exports as governments become more concerned about domestic food riots than the wellbeing of other countries. The bottom line is that it seems likely we shall be seeing disruptions, perhaps serious ones, in other oil producing states in the not too distant future.
Robert Baer provides more reasons to be worried:
There's been virtually no reliable information coming out of Tripoli, but a source close to the Gaddafi regime I did manage to get hold of told me the already terrible situation in Libya will get much worse. Among other things, Gaddafi has ordered security services to start sabotaging oil facilities. They will start by blowing up several oil pipelines, cutting off flow to Mediterranean ports. The sabotage, according to the insider, is meant to serve as a message to Libya's rebellious tribes: It's either me or chaos.
(Photo: A Libyan policeman who defected mans a checkpoint in the eastern dissident-held Libyan city of Tobruk on February 24, 2011 amid political turmoil and an insurrection against Moamer Kadhafi's regime. By Patrick Baz/AFP/Getty Images)