Jerry Jackson

Gold, Silver,Crude Oil Sharply Higher As Violence in Libya Climbs

In Economics, Libya on February 26, 2011 at 10:01 pm

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Pie chart of world oil reserves by region

Image via Wikipedia

The violent stand-off in Libya and elsewhere in the Middle East has triggered renewed speculation in precious metals and crude oil prices. The price of gold jumped $17.60 an ounce today to $1406 an ounce– much nearer its previous peak over $1420. Silver, as well, jumped over $2.00 an ounce to $33.91, precisely the scenario to make silver traders ecstatic. Meanwhile, crude oil, the commodity most directly affected by the intense political unrest, ran up over 5% in price in London to $107.60 a barrel. The last time oil sold at this level was in 2008, just on the eve of an approaching bubble at the $148 a barrel level. No doubt the pressure on oil prices was impacted by an oil workers strike in the Libyan oil fields, the cessation in exploration by BP, one of the major oil field operators there.There were reports that some European oil producing companies like Italy’s ENI, long a fixture in Libya, are thinking of evacuating their expatriate oil workers.Libya has the 9th largest amount of oil reserves in the world and is one of the lowest cost producing areas. A continuation of the shutdown in Libyan oil fields would mean a further spike in oil prices, and a threat to the rate of economic growth in Europe if not the US. In other words, political unrest is a boon to speculators like hedge funds and wealthy investors betting the commodity prices are going higher. But, it is on the other hand, damaging to middle class Americans who will hurt by higher gasoline costs this summer.


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