After Tripoli, what is a petro-ruler to do? And what is China to do?

The apparently successful Libyan uprising leaves a tattered playbook for the petro-rulers of the Middle East, and forces leaders from the West and especially China to rethink anew their interactions with these stewards of the heart of the global economy. Having learned from early stages of the Arab Spring that conciliation does not guarantee their survival, the toughest of the region’s dictators now grasp from Libya that they cannot presume that deadly action will throw off the rabble, either — they must find a new formula for sticking around. As for politically blithe China, it cannot assume that agnosticism is its best strategy for resource security — it, too, must recalculate, and probably take an unaccustomed political position rather than straddle the fence.

The self-immolation of Tunisian fruit-seller Muhammad Al Bouaziz in January ignited the repressed aspirations of millions in the region, leading to the important abdications of Tunisia’s Zine El Abidine Ben Ali and Egypt’s Hosni Mubarak. But it was the Libyan rebellion in February that raised the specter of flaming oilfields in the nations that truly count in the global economy — the oil-soaked monarchies of Saudi Arabia, Kuwait and Qatar. The price of oil surged (more on this matter below).

More important as far as the rulers were concerned, they seemed secure, but they could not be certain, and the biggest of them all — the al-Saud family of Saudi Arabia paid out $129 billion to its people in various allowances as a cost of retaining power. Its neighbors did similarly. For the decades to come — as long as these rulers remain in power — they will go everywhere with the albatross of al Bouaziz hanging on their necks. Yemeni leader Ali Abdullah Saleh remains in Saudi Arabia, which has been nursing him back to health after he was badly injured in a palace explosion two months ago, but is it in King Abdullah’s interest to allow Saleh to return home? Probably not — if rehabilitation was previously in the cards, today’s Tripoli events probably spell the end of Saleh’s hopes.

As for outside powers, Western leaders anticipated today’s events in Tripoli by demanding the resignation of Syrian leader Bashar al-Assad (who so far has responded by pushing ahead with the bloody end of the two options open to these rulers in the traditional Dictators Playbook).  The dancing in Tripoli tells the United States and the European Union that NATO bombing was the right thing to do, and that they must continue to be proactive or lose the Arab street.

One of the biggest recalculations may be under way in Beijing. Last March, China said the world should stay out of the Arab Spring. This summer, it shifted tack. Largely this change of heart was because it needed to go along with the Arab League. But China’s ultimate aim is secure access to the raw resources required to drive its economy. Until the Arab Spring, China could massage the shoulders of dictators everywhere, and take home boatloads of oil, metals and minerals. That is no longer a dependable bet: Successful opposition movements may not be favorable toward apolitical resource-buyers, thus motivating Beijing to be more nuanced in whom it succors.

Update: Libyan rebels say China as well as Russia and Brazil may be on the outs on oil deals because of their failure to vigorously oppose Col. Muamar Qaddafi, Reuters reports. Western oil companies meanwhile are in good stead.

What about the economic impact of Libya? We are looking at a further fall in oil and gasoline prices, which have been in serious decline because of general economic pessimism. Before this, global oil prices and particularly European-traded Brent crude had been driven up by the Flaming Port Index referenced above. That was psychology — traders thought the Arab turmoil might spread to Saudi Arabia, and hence built a risk margin of an estimated $10-$15 into the price of a barrel of oil. But there was also a physical reason — the loss of 1.2 million barrels a day of Libyan exports, among the most prized light and sweet oil in the world.

So to the degree Libyan crude must return to the market in order to lock in lower prices, how fast can we expect that to happen?

Reuters has run out a poll of 20 analysts who think that it will be a year or even four years before Libya’s full export volume is restored. But one thing to keep in mind is that no one including the Libyans themselves knows the overall shape of their big oilfields and infrastructure after all the fighting (pictured above: smoke rises from a petrochemical plant at the oil port of Brega last week).  In an email exchange, Phil Flynn of PFG Best estimated that half or even 70 percent of Libya’s pre-revolt production could be back on stream within three months (read here for his blog post today).

Flynn is on the optimistic end of the thinking out there. Much will depend on how secure western companies feel about returning to their fields and facilities, and restoring the flow. But Robin West, chairman of PFC Energy in Washington, told me that he picks up eagerness on the part of the industry to get back to work.

Peter Beutel of Cameron Hanover, a hedge fund advisory firm, expects gasoline prices to fall once Libyan oil reaches the market, one reason being that it yields so much more than heavier crudes in the way of gasoline. Beutel told me that oil prices could fall to $74 in the next 36 to 48 hours. In the video below, though, Dominic Schnider, global head of commodity research at UBS Wealth Management, tells Bloomberg that he sees oil possibly falling to $68 a barrel.

At Bloomberg, Amrita Sen of Barclays Capital says that Libyan crude may never return to its pre-uprising levels — Iraqi oil has not regained its pre-2003 scale of production despite the long-ago toppling of Saddam Hussain, and in Libya one simply doesn’t know if there will be the security necessary to pump large volumes, she says in this video.

Yet underlying factors are growing much more complex. One thing is the stalling of the global economy, says Frank Verrastro, director of energy and national security at the Center for Strategic and International Studies. Verrastro told me:

A few months back, restoration of Libyan crude would have had a calming impact on the market, especially in Europe where 80 percent of the oil is used.  [But] today, fears of a sustained economic downturn means lower prices and less need for that oil in terms of immediacy.

Ultimately, the Libyan uprising turns out to be a symptom of risk and not a malady in itself — the risk is still out there, Amy Myers Jaffe of Rice University told me in an email: "If you really think about it, the lesson of Libya is going to be that other populations will feel encouraged to stay in the streets (or take to the streets), and that could mean future risk to supply."