Boca Raton, FL (PRWEB) March 4, 2011
With the Libyan government and the Middle East in turmoil for the foreseeable future, it is unlikely that international companies will resume oil production resulting in oil spiking at $120 a barrel, according to James DiGeorgia, editor of the Gold and Energy Advisor (http://www.goldandenergyadvisor.com).
"We are heading into treacherous times," said DiGeorgia, "and things in the Middle East will get worse before governments and oil production are stabilized. If the turmoil spills over to the West Bank and results in the collapse of the PLO, I see oil hitting the $120 plateau. The situation could worsen if the PLO collapses since that would signify that more radical elements are gaining control in the region."
DiGeorgia estimates that Libyan oil production is down by 75 percent as foreign companies have shut down production in efforts to get employees to safety. At its recent peak, Libya was producing 1.78 million barrels a day.
"Even if the situation normalizes - whatever that means - it would still takes weeks for companies to bring these wells back to full production," added DiGeorgia. "Thousands of operators have left the region, and it is certainly unlikely that these companies could resume drilling quickly."
DiGeorgia also points to the distinct possibility of similar political upheaval in neighboring Algeria, which produces 1.38 million barrels a day.
"There has been unrest in Algeria," he said, "but at this point there hasn't been any disruption in production. However, if these wells shut down, we could see oil at $220 a barrel in the near future."
He said the current situation doesn't bode well for the global economy which still thirsts for oil, as reflected by his prediction that worldwide oil consumption will rise by 3 percent a year through 2015.
"The major problem," said DiGeorgia, "is that these higher oil prices will certainly slow the global economy, which, in recent weeks, has showed signs of improvement."
DiGeorgia disputes reports that Saudi Arabia could fill the void because he doubts that its reserves are as large as reported by this Arab state.
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About The Gold and Energy Advisor
The Gold and Energy Advisor is a monthly newsletter that covers the precious metals and energy markets, with the single goal of delivering money making recommendations to its subscribers. It also provides frequent updates and special reports about investing. The Gold and Energy Advisor is edited by James DiGeorgia, who has extensive experience in precious metals and the energy markets, and is considered one of the world's foremost authorities in both areas.
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