Unrest in Libya drives up gas, oil prices

February 22, 2011 3:37:55 PM PST
The unrest in Libya is blamed for driving up oil and gasoline prices.

Crude oil prices have surged 6 percent and on Tuesday the Department of Energy says prices at the gas pump are up 54 cents over a year ago.

Gasoline is now at its highest price for the month of February since 1990.

"It means you better gas up today because prices are more than likely going up," said Phil Flynn, an energy analyst in Chicago. "Earlier in the day of course we saw oil prices hit the highest level we've seen since 2008, which was the all time high. We've seen gasoline prices hit the highest they have ever been this time of year. So we 're talking some serious numbers."

Flynn has watched the market react to protests in Libya as Moammar Gaddafi refuses to leave and invokes a right to cancel oil contracts. He says the deeper concern is that the oil upset could slow economic recovery.

"People are running to the oil market because they're concerned that oil supplies will be cut off. They won't be able to get oil, and that's driving prices higher," said Flynn.

"Essentially, it's all one big market. We sell where it's easiest to sell and buy where it's easiest to buy. And so we make oil and sell to other people and we buy from others. And pretty much anything that disrupts the world price in one place is going to drive up or drive down prices everywhere else," said Mark Witte, professor of economics, Northwestern University

Witte says the disruption will likely have a ripple effect on gasoline, home heating oil and any goods that depend on transportation.

"There is this issue that it takes a while to get oil out of the ground and be refined to gas and oil, but even so anticipation about future prices can drive up prices now," said Witte.

An increase in oil and gas will impact goods. Anything that needs to be delivered will feel the effect. As part of a global economy, most of our products are transported.

Airlines may be the next industry to feel the effects of increased gas prices.