Libyan oil output plummeted 75% or 1.2 million barrels, sending Brent oil prices to around $120/barrel, as speculators wagered Persian Gulf producers will be next in the turmoil rocking some Middle Eastern countries.
But while oil producers and analysts are blaming speculators for the oil price hike, southern European countries are increasingly concerned about security of supply—not over disruption that can be easily offset with emergency reserves that can last for months, long after OPEC raises its production.
Libyan exports account for only 2% of world supply, and some estimates suggest that OPEC countries have 5 million bpd of spare capacity—more than 3x bigger than Libya's total exports. (Others think the excess capacity is much less.)
The 5 Mbpd estimate was handed down by ENI Chief Executive Paolo Scaroni. The company is the biggest producer in Libya, which pumps 1.7 Mbpd in 2010, according to an IEA report released this month.
Strongman Muammar Qaddafi’s threatened to blow up energy pipelines, which some report is already happening.
"Bottom line is that this is the very definition of a security of supply, of an energy security issue," said PFC Energy Market Intelligence Manager David Kirsch "The main impact is when do conditions allow the return to normal conditions. It becomes a question of how scenarios play out. If it goes to civil war. . .companies will reassess and look elsewhere."
There are few options though, especially as Asian demand increases and global surplus capacity decreases, even in Iran and Russia, where the political price is also an issue.
"Security of supply will be enforced with greater urgency. They will find other sources other than North Africa and the Middle East, like Norway and the Arctic," said Senior Petroleum Analyst Manouchehr Takin of London's Centre for Global Energy Studies.
