Why the uprising in Libya will affect the world economy

Libya is a big oil exporter, and if exports are cut off, the price of oil will increase.

Libyan citizens stand over a destroyed tank at Al-Katiba military base after it fall by the anti-Libyan Leader Moammar Gadhafi protesters few days ago, in Benghazi, Libya, on Thursday Feb. 24, 2011. The disruption from the uprisings in Libya may cause oil prices to rise around the globe.

Hussein Malla / AP

February 24, 2011

Unlike the revolts in Egypt and even more so Tunisia, the uprising in Libya is having a significant direct effect on the world economy. The reason is that Libya is a significant oil exports, and the disruptions caused by the uprising has already basically stopped Libyan oil exports, something which in turn has raised the price of that key commodity significantly.

Unlike the regimes in Tunisia and Egypt, the Qaddafi regime has proven itself to be able and willing to use brutal military force against protesters. Depite this, the opposition seems to have taken control over eastern Libya, while the Qaddafi regime seems to remain in control for now over the western parts , including the capital Tripoli.

The issue of which side will prevail remains uncertain. However, regardless of who ultimately wins, the economic outcome for the outside world seems to be quite clear:

1) In the short-term, Libya's oil exports will be cut off, causing a short-term increase in the price of oil.
2) In the long-term, Libya's oil exports will likely resume, meaning that there won't be much long-term economic effects of this.

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