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Price Shocks Ripple Throughout Country

Gas prices around the country have spiked in the last week, after settling down in the wake of the July 4th holiday. While the recent political unrest in Egypt seems unlikely to effect control of the Suez Canal, analysts claim international turmoil is in large part responsible for the price increase. Bloomberg reports that production difficulties in Libya are more directly relevant to US consumers:

Production dropped 16 percent to 1.13 million barrels a day last month, the lowest since January, according to data compiled by Bloomberg. The decline is partly because power shortages are disrupting the pumps that lift oil from beneath the ground, said Abdel Jalil Mayuf, a spokesman for state-run Arabian Gulf Oil Co., which pumps crude in eastern Libya.

“The country has been through a tumultuous time,” said Sana Abid, an oil analyst at KBC Energy Economics. “It looks bleak for Libya at the moment. They are going to struggle and that’s reflected in declining output.”

Austrian producer OMV AG (OMV) said today its fields in Libya, which produced 30,000 barrels a day last year, have been shut since June 25 because of the political situation.

The Libyan government is trying to address the problems facing oil producers, quadrupling the size of a special guard to protect the industry from attacks to 12,000 people this year.

Despite the fact that there is no easy end in sight, prices are expected to decline in the fall according to yearly trends. Nevertheless, this is yet another stark reminder that the potential for unforeseen international events to disrupt domestic markets is significant.

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