When Gadhafi Falls, Oil Prices Will Fall With Him

And stocks could 'soar': David Kotok
By Matt Cantor,  Newser User
Posted Aug 22, 2011 9:27 AM CDT
In this Sept. 23, 2009 file photo, Libyan leader Moammar Gadhafi addresses the 64th session of the United Nations General Assembly.   (AP Photo/Richard Drew, File)
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(Newser) – If the rebels succeed in taking Moammar Gadhafi down, expect oil prices to follow suit—which means stocks could skyrocket, writes analyst David Kotok at Business Insider. An end to the Gadhafi regime would likely allow Libyan oil production to rebound to a pre-crisis daily output of 1.6 million barrels. In that scenario, oil prices will fall worldwide as oil futures climb, and the US and other economies will get a big boost, explains Kotok, because "the oil price acts like a sales tax on consumption."

"A penny drop in the gas price per gallon gives Americans 1.4 billion more dollars a year to spend on things other than gasoline"—and we may be about to see gas prices that have a "2" after the dollar sign, a shift that most forecasts aren’t taking into account right now. But analysts remain divided on how quickly production will ramp up, notes the AP, which heard estimates ranging from three weeks to a year, and cites the state of infrastructure and the speed at which oil companies can return workers to Libya as factors. "Libya's output is going to take a long time to recover, and the recovery will be gradual," says an OPEC official.

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