Oil Prices Reflect Fears Unrest Will Spread Oil prices rose sharply around the world Tuesday. The spike reflects fears that the political turmoil in Libya could spread to other Gulf countries like Saudi Arabia, the region's biggest oil supplier.
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Oil Prices Reflect Fears Unrest Will Spread

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Oil Prices Reflect Fears Unrest Will Spread

Oil Prices Reflect Fears Unrest Will Spread

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ROBERT SIEGEL, Host:

NPR's Jim Zarroli reports.

JIM ZARROLI: Energy analyst Fidel Gate of Oppenheimer and Company notes that they had to pay dearly to do business with the Gadhafi regime.

FIDEL GATE: Gadhafi and his cronies put their money - this money in the bank accounts. And obviously that's why the people are rioting because they don't see a cent trickling down to them.

ZARROLI: But the unrest in the country has sent a shiver through the oil markets. Gate says with the world economy recovering, there's a growing demand for oil right now.

GATE: In a tight market, for whatever reason, any perception of supply disruption will have an impact on price.

ZARROLI: Gate says the sheer lack of reliable information coming out of Libya right now has made the markets especially nervous. Gadhafi's decision to declare force majeure over its oil contracts today was another worrisome sign. It allows the regime to break any contracts it signed with oil companies. David Pumphrey is an oil expert at the Center for Strategic and International Studies.

DAVID PUMPHREY: It usually indicates there are deeper troubles, so I think many people are watching now to see what is the reason for this and what does it mean for Libyan exports into the marketplace.

ZARROLI: But what's really scaring the markets, he says, is what the Libyan unrest says about the region as a whole. The first two countries to be swept up in the unrest, Tunisia and Egypt, weren't big players in the energy business and the markets could shrug off their impact. Since then, the violence has spread to Bahrain and now Libya, he says.

PUMPHREY: We're beginning to see an accumulation of situations. Individually, none of them should be a problem, taken together, I think it causes more concern, especially if there's a risk that some of this spreads into the really big producers in the gulf states.

ZARROLI: Jim Zarroli, NPR News.

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