In the here and now, that headline obviously applies to Libya, but it also serves as an important reminder that some OPEC members have become acquainted with political upheaval and regime change over the years and that does not always equal increased oil production. Put another way, there have been plenty of regime changes in Africa and the Middle East over the years, with most not being conducive to Western interests, and here we are living in a world of a peak oil.
Since the onset of political violence in Libya in February, the North African nation has been alarming case for myriad reasons. Tops on that list is the fact that Libya was Africa's third-largest oil producer behind fellow OPEC members Nigeria and Angola at the time and because plenty of U.S. and European oil companies operated there.
Along those lines, it should be good news that the oppressive Qaddafi regime has been toppled, right? After all, U.S. oil majors such as ConocoPhillips (OXY) and Occidental Petroleum (OXY) saw their second-quarter results hampered by lost Libyan production. BP (BP), Europe's second-largest oil company, has been champing at the bit to get a couple of projects going in Libya, but those efforts were delayed by the aforementioned violence.
History shows the answer to the question in previous paragraph is ''Not so fast.'' Yes, it must be acknowledged that Libya is currently pumping about 60,000 barrels of oil per day, well below the pre-violence level of 1.6 million barrels. Arguably, it should not take that long to significantly boost the 60,000 number, but to get back to the 1.6 million neighborhood could take several years.
Beyond that, as the New York Times noted on Tuesday, political revolutions in Iran and Iraq stifled oil output in those countries. It can and should be noted that Iraq is at least making efforts to right its oil production course. On the other hand, political change in Iran has set that country's oil industry back so far analogies do not it justice.
Of course the case of Venezuela and Hugo Chavez cannot be forgotten. Chavez has a well-known penchant for nationalizing industries in his country and while he may enjoy doing this, Venezuela's oil production has suffered as a result. And while it may hard to remember given that Russia is currently the world's top oil producer, the Times astutely notes that following the collapse of the old Soviet Union, Russian oil production suffered mightily for several years afterward.
Remember this before getting too excited about Libya: Iraq currently produces 20% LESS oil on a per day average than when Saddam Hussein came to power into 1979, according to the Times. Then there is the ultimate wild card of what type of regime replaces Qaddafi in Libya. Regime change in the Middle East often means exchanging bad for bad and with little clarity on what the near-term holds for Libya, it is probably best to temper any expectations that the country will produce 1.6 million barrels a day anytime before 2015.
Todd Shriber
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