February 23, 2011
If the turmoil paralyzing parts of the Middle East and North Africa brings oil production in Libya and Algeria to a standstill, it could cause crude oil to explode to $220 a barrel, derailing the global economic recovery.
According to a new report from Tokyo-based Nomura, a simultaneous production halt from embattled Libya and neighboring Algeria would reduce OPEC spare capacity to 2.1 million barrels a day and may cause crude to spike from about $97 a barrel today to $220 a barrel.
“The closest comparison is the 1990-1991 Gulf War,” the Nomura analysts, led by Michael Lo, wrote, saying crude prices leaped 70% in seven months when OPEC’s spare capacity was cut to just 1.8 million barrels a day during that conflict with oil-rich Iraq.
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