The violence in Libya has been going on for weeks. Following actions in neighboring countries overruling the government, Libyans followed suit. However, the halt of oil production is a fairly new situation. Eni, an Italian oil company, and Repsol, a Spanish oil company, both said they suspended some of their oil operations in the African country.
“Certain oil and gas activities in the country have been temporarily suspended in a precautionary way,” said an Eni press release statement. As a whole, Libya produces 1.6 million barrels of oil each day out of the worldwide total of 87.5 million. Eni produces 250,000 barrels each day, while Repsol makes 34,000 barrels each day in Libya alone.
The trouble in Libya also affects nearby countries. On Monday, the Ministry of Foreign Affairs (MOFA) advised Taiwan citizens not to travel to the African country. They have placed their danger level at red, the highest of their four-tier system.
The news that half of the oil production in Libya has been halted has made oil prices rise to over $100 a barrel. What does this mean for consumers?
The national average per gallon of regular unleaded gas reached $3.19 on Wednesday. This is already $.53 more than a year ago. The cost per gallon could increase to as high of $3.75 in the spring. This timeframe gives Americans a couple of months of “lower” oil prices before the crisis in Libya affects our wallets.
In the Danbury, Conn., area, gas already costs $3.32 per gallon. Should the cost increase as much as analysts believe, I’ll be paying $3.98 per gallon this spring. It’s already an expensive bill with each fill up every week ($66). Add the extra $.66 increase, and my bill is nearing $80. As a college student and someone who is saving money for a wedding, paying that much for gas is hard to stomach.
So $4 per gallon is as high as it will go, right?
Not exactly. If prices rise near $150 per barrel, and hold at that level, cost to the consumers could get as high as $5 . In 2008, when barrel prices reached $147 a barrel, consumers had to pay a little over $4 per gallon. What’s changed between then and now? At that time, the United States was already in a recession, but not everyone cut back on spending yet. As we reach into our fourth year of the recession, Americans are spending less every day. A situation like this would cripple our economy, and that is something that we as a country can’t afford to watch.
Hargreaves, Steve, “Libya oil production grinding to a halt,” CNN Money
“MOFA issues highest-level warning against Libya travel,” The China Post
Rugaber, Christopher S. and Aversa, Jeannine, “Higher oil prices would hamper global economy,” Wral.com