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Oil prices are up too, due to the turmoil in the Middle East and North Africa. OPEC countries supply around 40 percent of the world's oil. After violence erupted in Libya, the price of a barrel shot up to heights not seen in over two years. That's despite the fact that oil is still flowing there.

As NPR's Christopher Joyce reports, even a perceived ripple in the oil industry creates waves all over the world.

CHRISTOPHER JOYCE: Oil experts like Phil Verleger, an economist at the University of Calgary, are quoting Yogi Berra lately, as in: It's deja vu all over again. Verleger is thinking about the political convulsions in Iran, Kuwait and Iraq that have caused oil prices to gyrate since the 1970s.

This time, Libya is in trouble. Sure, if all Libyan wells shut down, that's only two percent of the world's oil. But Verleger says not all oil is created equal.

Mr. PHIL VERLEGER (Economist, University of Calgary): Now, it happens that the Libyan crude has almost no sulfur and produces a great deal of diesel fuel per barrel of crude, which means it's very valued. One can think of it like fat-free milk.

JOYCE: Libyan oil is light and sweet. It's the kind that refineries want for making low-sulfur diesel and jet fuel. Europe uses a lot of diesel, the U.S. makes a lot of jet fuel, and both markets require low-sulfur fuel because it pollutes less.

Okay, so the Saudi Arabians have several million barrels a day of excess capacity. But Saudi oil isn't light and sweet. It's heavy and sour.

Mr. VERLEGER: So the loss of the Libyan crudes may not be easily replaced by just boosting Saudi production. In theory, you might need four barrels of Saudi crude for two barrels of Libyan crude to get the same amount of diesel, but if you don't have the capacity to take out the sulfur, the Saudi crude is useless.

JOYCE: The good news is, more refineries are set up to remove that sulfur now. As Charles Drevna explains - he's the head of the National Petrochemical and Refiners Association - refineries are retooling to expand their options.

Mr. CHARLES DREVNA (National Petrochemical and Refiners Association): Most companies are trying to use a wider array of crudes, being able to process this. That's why there's been a lot of modifications to refineries.

JOYCE: But will they be able to get their hands on enough oil in the first place? Jim Burkhard at Cambridge Energy Research Associates says right now, worldwide demand is galloping ahead. It's largely driven by economic growth in China and India.

Mr. JIM BURKHARD (Cambridge Energy Research Associates): When you have an environment of strong global economic growth, and then you have a supply crisis, even if it is just two percent of global supply, it's increasing anxiety.

JOYCE: That anxiety is also driven by the fact that the trip from oil pump to gas pump is a long and winding road. Pipelines, seaports, tanker fleets, refineries and the workers who run them are all over the Middle East and North Africa and thus at risk from disruption.

Mr. BURKHARD: That is one reason why the unrest in Egypt created anxiety in the oil market. Egypt's a net importer of oil, but it is a key transit point.

JOYCE: And anxiety drives panicky buying, even hoarding, by institutions that use a lot of fuel, like state governments or airlines.

Severin Borenstein is an oil economist at the University of California at Berkeley. He says fear of higher oil prices can become a self-fulfilling prophecy.

Mr. SEVERIN BORENSTEIN (Oil Economist, University of California-Berkeley): They see the chance that oil is going to be disrupted in the next month or two, and they get in and try to either, through the futures markets or through bilateral contracts, lock in prices. And as more of them do that, it drives up the price.

JOYCE: There is a safety valve at hand if gas prices skyrocket - 700 million barrels of oil in the U.S. Strategic Petroleum Reserve alone. An infusion from the reserve might only be a psychological balm, but then, psychology is a big part of what drives the oil market.

Christopher Joyce, NPR News.

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