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Middle East Upheaval Affecting Oil Prices

posted on February 25, 2011


With global food prices on the rise and an increasing portion of American corn destined for ethanol production, former President Bill Clinton this week called for the agricultural community to consider the impact on poorer countries.

While acknowledging the importance of becoming energy independent, Clinton said, "we don't want to do it at the cost of food riots,"

The Agriculture Department estimates more than one-third of the U.S. corn crop could be used for ethanol by 2012. But ethanol proponents long have said that its production does NOT significantly drive up food prices. Instead, the Renewable Fuels Association pins the blame squarely on soaring crude oil prices.

Oil prices stabilized a bit Friday as refineries in Europe prepared for a sustained loss of high-quality Libyan crude, in what some are calling, "the greatest threat to the global oil supply since the Persian Gulf War."

 

Middle East Upheaval Affecting Oil Prices

The political uprising between Libyans and their long-time dictator Moammar Gadhafi has reverberated throughout the world's energy markets.

According to the largest oil producer in Libya, the country's violent upheaval has taken 1.2 million barrels of crude off the global market as energy plants and ports are shut down.

The figure represents most of Libya's total daily production which before the crisis reached 1.6 million barrels of crude. Libya sits on the largest known oil reserves in Africa.

Energy experts claim the shortfall could be made up by increased output in other countries, but warned a sense of "general insecurity" could trigger further price speculation.

Crude prices have jumped 20 percent to two-year highs in just a week since the beginning of Libya's uprising against Gadhafi's embattled regime. Investors worry that other large producers of crude, such as Iran or Saudi Arabia, could be engulfed by similar chaos and cause further oil speculation.

According to AAA, average U.S. gasoline prices have crested over $3.23 per gallon. And experts predict $4 a gallon gas or higher could be here by summer driving season.

 


Tags: biofuels corn Middle East news oil protests renewable fuels