Q: Why did gas go up 60 percent over a conflict in Libya when Libya only supplies 2 percent of the world's oil?
- Bobby Blish
A: Because Libya produces sweet, sweet crude. And there's not much spare sweet oil around in places not suffering what oil analysts call "unrest."
"Sweet" is a general term the oil industry uses to describe oil that comes from the ground with a low sulfur content, among other qualities. And like wine from Napa Valley, it's highly desirable on the world market because it is relatively easier to refine into gasoline, diesel and jet fuel with fewer emissions.
So, a sweet-oil shortage can have an amplified effect on the price of gasoline at the pump.
Various oils can range from $50 to $150 per barrel, depending on their chemistry and how easily they are refined.
Some are heavy, goopy or high-sulfur, said Fred Rozell, retail pricing director for the petroleum price tracking company OPIS. Oil markets tends to track the price of light or sweet oil, and it's the price often appearing in media reports.
Libya may produce only small percentage of world supply in any given month, but that sweet oil production basically ended the moment the civil war began there.
With less sweet oil on the market, the price of that oil can rise quickly, and refineries desiring low-sulfur oil had to draw more from countries like Algeria, Nigeria, Yemen and Bahrain.
And to keep a marginal surplus of oil around, other countries that have larger stockpiles, like Saudi Arabia, would need to ramp up shipments to prevent a shortage that could really throw oil markets into a tizzy.
Perhaps just as importantly, Rozell said, the oil markets abhor uncertainty, and there's a lingering concern that the civil conflict that erupted in Egypt, Bahrain and Libya could spill over into other countries with far more influence on world oil supply, namely Saudi Arabia.
- Richard Mullins
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