Crisis in Libya

Libya is considered the eighteenth largest oil exporter holding around 46.4 billion barrels of oil reserves. Even though Libya exports mostly in Europe, there is a certain percentage that comes to the United States and certainly its political and economic situation affect the prices of oil and the U.S stock market as well.

The latest situation in Egypt and other Middle East countries where anti-government protestors demanded that longtime dictators resign their positions have encouraged Libya to do the same; however, taking Libyan leader Muammar al-Qaddafi is taking more than expected. Libya is member of OPEC (Organization of Petroleum Exporting Countries) which is extremely concerned with Libya crisis since it holds the largest oil reserves.

As to the situation in Libya is turning violent every time, in The United States the oil prices is going up excessively. “Libya is one of the world’s primary sources of the much-sought-after sweet crude, preferred by refineries” (Sheridan, 2011). The demand for oil is very high, and Libya crisis makes the situation even tenser since it is unpredictable when its situation is going to be stable again.

According to reports, most of the refineries in Libya have been shut down. The latest report in the price of a barrel of oil in the United States is near $109; in some states, the price of gasoline is already $4 a gallon. As this situation continues, the price of food and other goods will also increase unless Libya stabilizes the crisis and an agreement is given to solve this problem.

Analysts are very concerned with the rising of the oil prices, and the uncertainty panics certain investors as well. The United States is still recovering for the downturn occurred in 2008 when market collapsed and investments were all going down in the stock market. The recent earthquake occurred in Japan is also affecting the stock market. The stock market is very sensitive to changes and has no control over external forces and situations. “U.S stock fells, sending the Standard & Poor’s 500 Index lower a third time in four days, as escalating violence in Libya tempered optimism that the biggest equity rally since 1955 will extend into a third year” (Nazareth & Haigh, 2011).

In addition, Nasdaq composite Index, and 27 of the 30 components of the Dow Jones are declining making a long list of red numbers at the end of the day. However, two of the blue chips gainers are the oil giants Exxon and Chevron that keep advancing in the stock market. Some of the stocks already being affected by Libya crisis are: Caterpillar Inc. (CAT),

DuPont Co., Texs Instruments Inc. (TXN), Finisar Corp. (FNSR), International Business Machines Corp. (IBM) Wal-Mart

References: Nazareth, R., & Haigh, A. (2011). U.S Stocks Decline as Libya Unrest Tempers Economic Optimism. Bloomberg LP. Sheridan, C. (2011). Crisis in Libya Raises Fears of Skyrocketing Oil Prices Causing Pain at the Pump. FoxNews.com.