As the Libyan leader runs out of options, the prospect that he will try to use oil as a weapon cannot be ruled out.
Oil can be a catalyst for Libya's rebirth
'Our oil is our weapon in war and peace," reads one of the many signs that line Libya's roads, proclaiming Col Muammar Qaddafi's views. As the Libyan leader runs out of options, the prospect that he will try to use oil as a weapon cannot be ruled out.
Whatever happens to Col Qaddafi, Libya's oil will remain an essential component of the country's future and for the growth of many other markets around the world. Germany, Italy and Spain are among the many nations that depend on Libya, the world's 12th largest energy producer, to fuel their economies. Libyan stability hangs in the balance, but the stability of the global marketplace cannot be insulated from the tumult in North Africa.
The current state of Libya's oil industry remains muddled, like much of everything else in the country. Shokri Ghanem, the head of Libya's state-run National Oil Corporation and the nation's de facto energy minister, has said that oil production has been halved on account of foreign workers who have left the country. The east of Libya, however, where nearly 80 per cent of Libya's oil is located, is under the opposition's control. Hassan Bulifa, an oil official in the eastern port city of Benghazi, said that he and his colleagues want "to send a signal to the free world that we are serious about pumping the oil we have".
Organisations such as Opec and the EU have tools to support their efforts and historical models to guide them. Algeria's oil production, for instance, was only marginally affected during its civil war.
Perhaps more important than keeping the oil flowing, however, is the effort to ensure that oil revenues do not end up in Col Qaddafi's coffers. Twenty-four institutional investors have called on oil companies to place their revenue from Libyan oil into a recovery fund, though no such vehicle has been created. Discussions between oil companies, the United Nations, and Opec to create one are overdue.
There are limits to what the international community can do today to protect Libya's oil infrastructure but they can prepare teams to respond if Libya's oil infrastructure is damaged. Members of Opec, in particular, can have technicians ready to help Libya get its oil fields back on line as soon as they can enter the country safely.
The international community can do much to ensure that Libya's energy resources can serve as a catalyst for the country's rebirth. If and when Col Qaddafi exits, his idea that oil should serve as a weapon must go along with him.