Libya is Not Going to Export Oil Any Time Soon

It appears rebel dissidents have checkmated Moammar Gadhafi—bringing with them a quickly deliquescing fog of war–and this has raised a very interesting question.

When will Libya, once the world's 12th-largest producer of oil (mostly to Europe) start exporting again? Oil shipments were halted six months ago when the Libyan rebellion began in earnest and exports were all but shut off in February as the unrest intensified and international oil companies began evacuating workers.

However, despite this, recent events have many hoping that the fighting will soon subside. They believe that once Libyan oil starts flowing again, the price of gasoline in the U.S.  should go down.

Of course, the operative word here is “should.”

If rebels actually do manage to oust Gadhafi, it could clear the way for a new government that would allow for a return to pre-uprising oil production. However, according to a recent Associated Press report, bringing Libyan oil production back to previous levels may take years.

Although international oil prices fell this week due to the prospect that Libyan oil will triumphantly reenter the market (because of a supposed de-escalation of violence between Gadhafi and his enemies), there are many factors that Libya needs to address in order to return to her former prosperity.

First, and most obviously, security must be reestablished. A new government will have to be formed, the United Nations must lift their international sanctions and damaged oil fields and pipelines have to be repaired.

With intense back-and-forth fighting, the conflict in Libya has damaged pipelines and fields and forced out foreign oil engineers who were brought in to help export an estimated 1.5 million barrels every day. It may take years to correct these damages and to calm understandably wary investors.

"This [the apparent overthrow of Gadhafi] isn't going to lead to an overnight restart of Libyan oil exports," says JimBurkhard, managing director for global oil at IHS CERA, in a recent AP report.

Shokri Ghanem, the former chairman of Libya's National Oil Company, disagreed and said Libya could start producing oil within three to four months.

"There is some damage to installations, and there is a problem with some wells that were not closed properly," said Ghanem. He believes that it will take a maximum of two years to get back to pre-uprising production levels.

Eni, the largest foreign oil producer in Libya, is not so optimistic. Although it has sent some technicians back to the country to restart oil and natural gas operations, some analysts believe that restarting crude production could take several years.

Bottom line: whether it is months or years, it will take awhile for Libya to affect any sort of change at the pump. The fighting is not over yet, let alone the establishment of a stable government or the repairing of necessary facilities.

What is truly puzzling is that, despite all of this turmoil and uncertainty, there remains an unnervingly large number of Americans who fail to see the benefit of an energy-independent America.

Civil unrest and wars in the East should convince them otherwise.

Then again, the operative word here is “should.”