WASHINGTON â€“â€“ Oil prices jumped to their highest levels since 2008 as violence spread through Libya, the first major petroleum exporter to be shaken so far by the drive for democracy in the Arab world.
In London on Monday, the benchmark price of crude oil surged $5.48, or more than 5 percent, to $108 a barrel. The rise knocked European stock markets sharply lower as fears mounted that soaring energy costs could derail the global economic recovery.
U.S. oil prices also jumped, rising $5.22, or 6 percent, to $91.42 a barrel in electronic trading on a day when most U.S. financial markets were closed for the Presidents Day holiday. U.S. prices lately have been consistently below the London price because the United States is less reliant than Europe on Middle Eastern oil. Also, U.S. crude inventories have been near record highs.
Still, the domestic price of oil also is near a two-year high, reviving memories of the energy price surge in the first half of 2008, which saw crude prices rise to record levels. Some analysts said further violence in Libya could push prices beyond the all-time high of $147.27 a barrel set in July 2008.
Unlike Egypt, Tunisia and Bahrain, which are not major oil producers, Libya is a member of the Organization of the Petroleum Exporting Countries, or OPEC, and it sells about 80 percent of its 1.5-million-barrel daily output mostly to Europe. Citizen protests and the attempts by the government of Moammar Gadhafi to suppress the protests have begun to squeeze the countryâ€™s oil production.
A German oil venture is suspending its daily production of 100,000 barrels, while other major oil companies have started to evacuate family members and non-essential employees from Libya. The Nafoora oil field in a prolific part of the country has been shut down by strikes, Al-Jazeera reported.
A tribal leader in eastern Libya, home to several major fields, also told Al-Jazeera that his tribe â€œwould stop oil exports to Western countriesâ€ if the regime did not end its violent crackdown.
The regimeâ€™s spokesman, Gadhafiâ€™s son Seif Islam, said oil fields could be attacked by â€œthugsâ€ if the protests went too far.
â€œWe will have a new Libya, new flag, new anthem,â€ he said Sunday in a rambling, often combative speech that was the regimeâ€™s attempt at compromise. â€œOr else, be ready to start a civil war and chaos and forget oil and petrol.â€
Most analysts said they think Saudi Arabia, the worldâ€™s largest oil producer, would quickly ramp up production to compensate for a drop in Libyan exports.
But oil prices might continue their climb, given the traditional skittishness of oil markets. That would spur higher prices for gasoline, jet fuel and diesel, imposing a de facto tax on consumers and businesses and further slowing the sluggish global economic recovery.