Libya is the most unexpected country in Africa, which had shown a GDP growth rate of 104.37% in the year 2013 and -52.5% in 2012. After suffering dictatorship for almost 40 years, Libya is now taking breadth in free air and trying to grow business in the country.
Libya has vast Oil reserves and biggest in Africa, reserves of 48.5 thousand million barrels in 2013, which is 2.9% of World Oil Reserves. According to most current data, Libya produced 360 million barrels in 2013, which is just 1.1% of global oil production.
“Libya is looking to expand its oil exports and improve economic conditions. Stability of Economy with prosperous growth is the biggest challenge for Libya.”
Libya has tremendous opportunity to increase their oil production and advance their economy. An increase of 15% in oil production can create an effect in the global oil market, can lead to unstable oil prices and supply issues. Increase in production at this point in time can reduce the price of oil, which already fell down to the US $60 per barrel, took a slump from the US $120 per barrel. Further reduction in oil prices can affect the economy of oil-producing countries (major). Countries like Saudi Arabia, UAE, Venezuela, etc. are already facing low oil price issues, which reduced their revenues to half and running at just above break even.
Nigeria will be most affected by Libyan oil production hurtle. Nigeria is Twelfth (12) biggest oil producer in the world and a founded member of OPEC. Nigerian economy is dependent on Oil, Gas and Minerals export. Around 90% of Exports of Nigeria is Oil, Gas and Minerals only. Nigeria secured the highest GDP growth rate in Africa for 2015.
Decline in Oil prices will help emerging economies which are importing most of the oil for local consumption. This scenario will accelerate the growth of countries like India and China. On the other hand, GCC countries and other major oil producing countries will face a trouble in getting a livelihood. Oil production cost is high in these countries, which will push revenues below break-even.
Another major factor that will come into picture is Ukraine Crisis. Russia is the biggest exporter of oil to European countries. Most of the oil pipelines goes through Ukraine. Oil export of Russia is already contracted and Ukraine halting Russian Oil will force EU to buy oil from USA, Africa or Middle East. Libya gets an opportunity here to supply oil to European countries and strengthen relationship with them. USA will try its best to supply oil to all European countries and improve its market share, which can lead Libya to dump its oil in emerging markets at a very low cost.
USA which is already in debt (huge), is trying to increase its revenue by selling oil, which recently decreased global oil prices to One-Third. US Debt to GDP ratio is above 101% which is one of the highest in the world. US Dollar being the global official currency for trading, can face an adverse effect, which can lead to US economic slowdown. Any further competition in oil export will increase the chances of debt bubble to explode in US.
Overall, any increase in oil production by Libya, can lead to global economic troubles and economic crisis, but it will be healthy for Libyan economic growth and emerging countries.