Experts believe there will be little impact on global oil markets at this point regardless of whether the ongoing Libyan civil war is indeed entering its final stages or continues to drag on for many more months.
For U.S. trucking fleets, that means the current slow but steady drop in diesel fuel prices shouldn’t accelerate much at all, since the decline is largely being driven by slowdown in global economic activity.
“Little crude oil from Libya won’t, with any meaningful consistency, hit the market for many months; most estimates I see are like a year,” Denton Cinquegrana, editor-West Coast spots for the Oil Price Information Service (OPIS), told Fleet Owner.
“In my opinion, in the short-term, this probably won’t do much, but looking out more medium/long term, it could help loosen up [oil] prices,” he added. “But then who knows where we will be economically at that time.”
Before civil war consumed it back in February, Libya produced 1.6 million to 1.8 million barrels of oil per day – roughly 2% of the world’s supply. Now, with much of the country a war-torn shambles, it will take significant time and money to reboot Libya’s oil production infrastructure.
“I’m skeptical that Libya will return to its pre-war output until 2013 or well beyond,” noted Ben Cahill, an expert on Libya at oil consultancy PFC Energy.
Fleets must remember that oil prices – and the prices of the fuels refined from it – now react more and more to other economic trends than pure supply-and-demand factors, OPIS’s Cinquegrana added, and the sluggish economic growth projections of late are what’s helping prices stay on a downward trend.
The U.S. national average price for diesel fuel slipped another two cents this week, according to data collected by the Energy Information Administration (EIA), falling to $3.81/gal. compared to $3.83/gal. last week and $3.89 the week of Aug. 8. Yet that’s still over 85 cents per gallon higher than at the same point in 2010, the agency’s data indicated.
EIA also noted that over the past few weeks – from July 1 through Aug. 19 – the movement of oil prices closely mirrored that of the Standard and Poor’s (S&P) 500 Index. Crude oil settlement futures prices for West Texas Intermediate (WTI) crude fell just over 13% while the S&P 500 stock index fell 16% during this period, the agency said.
“Recent economic news, such as a downward revision to U.S. GDP [gross domestic product] for the first half of this year, has provided downward price pressure across many asset classes during recent trading sessions,” EIA added, noting that the recent strong relationship between oil and equity prices resembles that seen during the economic downturn and recovery in 2008-2010.