Gadhafi’s death helps clear way for oil exports

Associated Press

NEW YORK

It still will be several months before Libya can export as much oil as it did before it descended into civil war earlier this year. But the killing of Moammar Gadhafi reduces the chance that violence will get in the way as Libya cranks up production again.

And as Libyan crude returns, it could lower the price of oil on the international markets and gasoline at American pumps.

The type of crude produced by Libya, known as light, sweet crude, is rare. It is especially valuable because it is easier for refineries to convert into diesel and gasoline. Many refineries can’t switch easily to processing other varieties of crude.

Before the civil war, Libya produced only 2 percent of the world’s oil. But even small interruptions in oil production can have a big effect on the price because the balance between supply and demand is delicate.

When fears arise that supplies might fall short, traders get nervous, and prices can go up fast.

The price of oil jumped 35 percent between Feb. 15, when protests started in Benghazi, and April 29, when oil hit almost $114 per barrel, the highest since 2008. Gasoline prices in the U.S. rose from $3.12 before the fighting to a three-year high of $3.98 on May 5.

High prices, plus the prospect that Libyan crude would disappear from the market for a long time, led a group of oil-importing nations to announce the release of 60 million barrels of oil from emergency stocks. That included 30 million from the United States.

The price of oil came down because traders figured Libyan oil would return after Gadhafi ultimately was overthrown — but also because of concerns that a worldwide economic slowdown would reduce demand for oil.

By Wednesday, oil had returned to its price before Libya’s uprising began. It fell 81 cents Thursday to $85.30 a barrel in New York trading. The average price of a gallon of gas in the U.S. was unchanged at $3.47.

The oil market’s reaction to Gadhafi’s death was muted because efforts to revive the Libyan oil industry have been under way for months under the Libyan transitional government.

“It was a foregone conclusion that Gadhafi was finished,” said Daniel Yergin, chairman of IHS CERA, an energy research firm, and author of a Pulitzer Prize-winning history of the oil industry.