The death of Moammar Gadhafi has definitely clarified one
piece of the jigsaw puzzle that is the global oil market: There
is now one fewer issue to hinder production security in a host of
oil hot spots. Beyond that, however, analysts believe his death
is not likely to impact the price of crude oil.
Oil production in Iraq, with one of the biggest oil reserves
in the world, has been compromised to a great extent by
insurgency for several years.
In Nigeria, rebel activity has been a constant cause of
concern in the global oil market: The Movement for the
Emancipation of the Niger Delta (MEND) has been able to deal blow
after blow to the country's oil production capacity by forcing
shutdowns and sabotaging pipelines.
And, in Yemen, tribal attacks supported by al-Qaida militants
have crippled the oil and-natural gas infrastructure
substantially, and a complete cut in exports is looming.
So the latest developments in Libya could help calm oil-market
nerves, but Gadhafi's death may not have any direct impact. After
all, the Libyan National Transition Council authorities have said
in the recent past that the country's oil exports will be
restored to prewar levels within about 15 months. This projection
still holds good, so the death of the country's ex-ruler is not
likely to make an immediate impact.
"The news of Gaddafi's death will certainly send a collective
signal that the next phase in Libya's national recovery can now
begin. But in terms of physical oil production there is not much
that can be done in the short term that is not already being
done," Daniel Yergin, chairman of IHS Cambridge Energy Research
Associates, wrote in a statment.
"The writing had been on the wall for some time in this
conflict, and Libyan oil production had already started to
recover from the near total disruption that occurred at the
height of the civil war," Yergin noted.
Before the recent revolution, Libya produced about 1.6 million
barrels of oil per day (bpd), 85 percent of which was exported to
The Organization of Petroleum Exporting Countries (OPEC) has
estimated that Libyan exports would return to preconflict levels
Some analysts think Gadhafi's death could help quicken the
pace of restoration of oil-export volumes because it has largely
pre-empted any need for action by elements still loyal to the
deceased ruler. "To many, the death of Qaddafi eases the specter
of a fully fledged insurgency that could disrupt oil production
for years to come," Syed Rashid Husain wrote in Arab News.
According to Libya's official oil establishment, the death of
Gadhafi and the cessation of the NATO bombing campaign will help
restore security and improve the logistical situation. "This will
improve transport to fields and we can now concentrate on
rebuilding the sector," Nouri Berouin, chairman of the National
Oil Company (
), told Reuters.
Regardless of the impact of Gadhafi's death on the oil market,
the late strongman made an indelible footprint on the global oil
market, according to Yergin. "The rise and fall Muammar Qaddafi
marks two pivotal points in the history of oil," said Yergin,
author of The Quest: Energy, Security and the Remaking of the
"After taking over power in Libya in 1969, a 29-year-old
Qaddafi initiated radical moves -- a shift in power from
international companies to oil exporting countries -- that set
the stage to the oil crises of the 1970s that thrust oil to the
center of world politics. Qaddafi's death comes at another signal
moment when the world is moving into a new oil era marked by the
peaking of oil demand in the West and the shift toward the fast
growth in oil use in emerging markets."