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“Pricing in Libya supply disruptions is one thing, but what if this social unrest spreads to Saudi Arabia, which holds 20 percent of the world’s oil?” said David Rosenberg, chief economist and strategist for Gluskin Sheff. “Do the math: we’d be talking about $200 oil.”
Saudi Arabia produced 9.8 million barrels a day of crude oil in 2009, 5.4 times more than Libya, according to the U.S. Energy Information Administration. Multiplying $8.44 by 5.4 equals a $45.95 jump in the price of crude.
“Oil would go parabolic,” said Joe Terranova, chief market strategist for Virtus Investment Partners and former energy trader. “The Shiite population (compared to the Sunni ruling family) is more concentrated in the oil producing region. The workers could strike.”
There's been virtually no reliable information coming out of Tripoli, but a source close to the Gaddafi regime I did manage to get hold of told me the already terrible situation in Libya will get much worse. Among other things, Gaddafi has ordered security services to start sabotaging oil facilities. They will start by blowing up several oil pipelines, cutting off flow to Mediterranean ports. The sabotage, according to the insider, is meant to serve as a message to Libya's rebellious tribes: It's either me or chaos.