Arab Freedom Worth an Oil Shock

Arab Freedom Worth an Oil Shock

Beyond that, much would depend on the durability of the price spike and on the policy responses. If the recent jump proved short-lived, the economic effect would be reversed. Among important questions is how far such unrest affects other producers, particularly Saudi Arabia. For now, the latter can replace lost Libyan production: Libya’s output – some 2 per cent of the world’s total – is less than Saudi Arabia’s excess capacity. Moreover, any reduction in output even in directly affected countries should be brief, provided capacity is undamaged: governments of oil exporting countries want revenues. Democratic governments might need the revenues more than despots.

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