Sometimes, the best-laid plans go awry. Over the last several years I have made a habit of commenting on economic predictions and openly musing about how economies perform. When you balance interest rates, foreign exchange and unemployment rates on two hands, usually you can come up with something reasonably intelligent. However, when a sucker punch comes at you out of the blue, you can never predict that. The world this week faces that sucker punch as a large oil exporter is currently in turmoil.
I have a friend in Libya. I surely hope he is okay. We used to be great friends, always discussing world events and always discussing NBA basketball. He was a Lakers fan and I was a Pistons fan and you could imagine back in the day the lively debates that we had. I would often debate him on the political leadership of Libya. At that time Libyan leader Qaddafi was a pariah on the world stage. In fact I was with my Libyan friend the night that Ronald Reagan bombed Tripoli. He was a nervous wreck, how could he not be.
Trying to look at faraway lands with a Western filter is always difficult. Libya was certainly one of those countries. While it was a pariah state back in the day when I was in graduate school over the last few years it is turned into a western friend actually fighting terrorism. Needless to say, 42 years of the same leader doesn’t remind anybody about democracy. It just so happens in the last two years the West turned the other way while Col. Qaddafi continued his un-hindered role as Libyan leader.
Of course as you all know much of the Arab Middle East has been in a tumult over some of the Arab despots who have ruled those countries for years. Egypt was the first one to hit the news and now Libya seems to be having their cleansing. There has been all types of violence in Libya even the government strafing protesters from Mirage F1 jets from the sky. It is turning into a complete mess, but with heavy foreign investment from Western countries over the last few years, the ramifications for Western economies is growing greater by the hour.
Libya is making oil markets nervous. I read one news report where protesters attacked an oil platform where Canadians were working. The best option for the Canadians was to run out into the desert. I have also read other news reports about Britain Norway Australia Germany and the Netherlands pulling staff out of Libyan oilfields. The price of oil has shot up over $90 for North American crude with the European price being over 100. A few weeks ago you could have never predicted that. Now, with a sucker punch coming from Libya, our Western economies are going to have to absorb the shock.
Libya’s oil output is about 1.6 million barrels a day. It is a small country, mostly desert and the oil is mostly exported. So with oil workers being pulled out as well as some bewildered Canadians running into the Sahara desert, oil prices are moving higher. Depending on how long the Libyan hiccup takes or whether it spreads to other places will surely have an effect on world oil markets.
It’s not like we have not seen this before. For instance in the 1990s Iraq was always rattling its sabers and the oil market responded accordingly. The latest manifestation of that took place post-2001 when the Americans invaded Iraq. Libya is a small enough country not to set the world on fire but it certainly could be a major irritant on the road to global economic recovery.
How is it going to turn out? I dunno. In my discussions with my Libyan friend through the years I always questioned what Qaddafi was doing for Libya. My friend always responded by saying he was far better than the monarchy and that despite the problems that he may represent the country was progressing. I don’t know if his wife felt the same way about progressive Libya but he was living under parameters set forth for him. He wasn’t as free as I was but then again, he never put himself in my place.
One local friend told me today, it’s hard to imagine what’s going on in Libya. In Canada this stuff doesn’t happen. Thank goodness for that. God speed my friend. I will be thinking about you.