Oil prices settled above $102 per barrel on Tuesday for the first time since September of 2008 as fighting escalated in Libya and petroleum demand grew in the U.S.
Libyan oil fields produce 1.6 million barrels of oil per day, which is less than 2 percent of global demand, but experts say the disruption is putting pressure on world supplies at a time when demand is rising.
The North African dictatorship has been embroiled in an uprising that has shut down oil production in many parts of the country. Forces loyal to Libyan leader Moammar Gadhafi used airstrikes recently in a battle against protesters for control of a key oil installation in the eastern half of the country.
Since the uprising began in mid-February, oil prices have soared nearly $17 per barrel, and retail gasoline and diesel prices in the U.S. have increased more than 25 cents a gallon. According to one estimate, American motorists are now paying $94.9 million more per day to operate their cars.
Uncertainty of Supply
While no one is yet talking about fears of a global shortage of oil, analysts say unrest in the region is causing difficulty in gaining accurate estimates of the scope of the supply disruption.
The Associated Press reports a Libyan oil minister said the production in the east had declined 50 percent, though international observers say the drop is higher. The International Energy Agency said Wednesday that between 850,000 and 1 million barrels per day were shut in. Its previous estimate was between 500,000 and 750,000 barrels per day.
Trade sources said four tankers with at least 2.4 million barrels of crude oil have sailed from Libya in the past 24 hours despite mounting violence.
Governments in Yemen, Oman, Iran and Iraq have clashed with protesters seeking reforms as popular unrest has spread in the region holding more than 60 percent of the world’s oil reserve.
Meanwhile, the Energy Information Administration reported that oil supplies in the U.S. fell by 400,000 barrels. Supplies dropped as refineries flushed out winter fuel blends in preparation for new formulas required during the summer. Despite the drop, the U.S. is still sitting on a relatively large surplus in both crude and gasoline and distillates compared with previous years.
The national average diesel price reported today by Pro-Miles.com is $3.768.
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