- By Steve LeVine<p> Steve LeVine is a contributing editor at Foreign Policy, a Schwartz Fellow at the New America Foundation, and author of The Oil and the Glory. </p>
We need some balance in the Libyan oil story. Is this north African nation an unmitigated disaster for those elsewhere in the world running an economy or driving a gas-guzzling vehicle? Notwithstanding the turmoil, the answer so far is no.
For good reason, much attention is focused on Libya’s oilfields, since they are the whole reason why the United States, Great Britain and a host of oil companies have been courting Col. Moammar Qaddafi since he reopened the country to the outside eight years ago. An as-yet unknown volume of Libya’s 1.6 million barrels a day has been shut down. Traders have bid up oil prices above $100 a barrel for the first time since 2008, though that’s not very surprising — what are traders supposed to do with such uncertainty (read: opportunity) staring them in the face? In addition, there’s valid concern about the stability of the Middle East’s big oil monarchies — Kuwait, Qatar and Saudi Arabia. As Cameron Hanover, the energy analytical firm, wrote clients in an overnight note: "With unrest all around them, is there any really strong reason to believe that the [United Arab Emirates] or Kuwait or even [Saudi Arabia] itself can remain oases in this swirling, engulfing sandstorm?"
Still, when it comes to oil, things are going surprisingly well in Libya considering the turbulence.
Consider this: While a significant percentage of Libya’s oil and natural gas exports has been shut down — perhaps up to 1 million barrels a day — the country most directly affected, Italy, says it’s compensated for the biggest loss, which is the gas supplies. In addition, locals in the oil-rich, eastern province of Cyrenaica say they intend to keep shipping what crude oil exports they can, and they appear able to do so.
In fact, in the unlikely scenario of Qaddafi hanging on to power in the capital of Tripoli indefinitely by brute force, there’s reason to believe that Cyrenaica could operate autonomously. In this scenario, once oil companies accustomed themselves to this new state of affairs and worked out the financials so the government’s take went to Benghazi, the capital of Cyrenaica, and not to Tripoli, the indication is that much of the oil could flow normally. In short, even though Tripoli is Libya in many ways, the entirety of the country would not have to wait for Qaddafi’s Ceausescu Moment to work its way to a denouement.
This doesn’t mean that Libya is a picnic. In fact, we’re looking at a long period of uncertainty there and in the Middle East as a whole. At the Financial Times, Javier Blas calls himself a pessimist — he thinks that the Libyan oil flow could take much time to return to normal. Reuters reports that its oil industry could suffer long-lasting damage.
Yet, again, as in Egypt, Tunisia and Bahrain before it, Libya’s experience has been surprisingly swift and comparatively restrained — dictators and monarchs do not easily loosen their death grip on their countries. Qaddafi is not leaving bloodlessly. But it is not yet the meltdown that he and others forecast.
Update: I emailed Prof. Imad el-Anis, a Libya expert at Nottingham Trent University in the United Kingdom, asking his view of an East-West Libyan split. He thinks there is one, but that it will not hold, and that the oil infrastructure is fairly interdependent. His remarks in full:
It is most likely that Libya will not remain divided in the way that it is right now for very much longer and I doubt that there would be some form of permanent division between east and west Libya. I say this for three reasons: 1) It is increasingly apparent that Libyans all over the country want a change in government — in east and west alike. Also, there really is an embedded sense of Libyan nationality among the masses and a divided Libya is not a popular idea; 2) The elements of the security forces and government institutions which are loyal to the Qaddafi regime have become quite few in number and limited in capabilities outside of the traditional strongholds of Tripoli, Sebha and Sirte, and I would think that much of the west of Libya will soon be out of the control of the regime. This should mean that people in the east and west will be united in many ways in the coming days and weeks, making a division less likely; and 3) The majority of the oil reserves, and production and transportation infrastructure in Libya is not in any one area (most oil for example, is in the middle and not in the east), and for the oil industry to function well in any part of the country there is significant reliance on infrastructure in other parts of the country. It would, therefore, be quite difficult for the east to go it alone.