Fallout from Libya = Higher Gas Prices $

Feb. 22, 2011— -- Why are gas prices going up?

"In a word: Libya," says petroleum expert Andrew Lipow, president of Lipow Oil Associates in Houston. He has been following gas prices one way or another for more than 30 years.

Unlike Egypt and Bahrain, he says, Libya is a significant exporter of light sweet crude.

Most of that gets exported to Europe: Italy, Germany, France and Spain. So, how does it affect the United States? We import 40 percent of our crude from Europe, refine it, and then export back to them the distillates, including gasoline and diesel. So, any disruption in Europe gets felt in the 50 states.

"You hear that we import a lot of crude," says Lipow. "And yes, we import about 9 million barrels a day. But less than 1 percent of that comes from Libya. What the oil market is worried about now is, we've seen unrest spread throughout the Middle East -- Morocco, Algeria, Tunis, Egypt. What if that should spread to Saudi Arabia, which accounts for 9 percent of the world's supply? They are the supplier of 11 percent of our crude oil. The market is worried about that supply being disrupted."

Oil prices jumped above $93 a barrel in Asia today amid fears the violent protests in Libya could disrupt crude oil supplies. Weekly gas prices are expected to be released later this afternoon.

"Oil hates uncertainty. It hates political turmoil," says John Hoffmeister, CEO of Citizens for Affordable Energy and the former president of Shell Oil. "And traders will be having customers buy it as quickly as they can to lock in supplies, and that drives the price up."

Victor Shum, an energy analyst with Purvin & Gertz in Singapore, says fears that the turbulence spreading across the Arab world would shut down oil production are most likely unfounded, but they are still having an effect on prices.

"It's unlikely we're going to see any meaningful disruption of oil from the Middle East or North Africa, but the spread of this unrest has raised anxieties," Shum tells The Associated Press.

Over the next seven to 10 days, says Lipow, the U.S. consumer is going to see rising prices -- almost immediately. That's because there's not a lot of lag time when it comes to pricing.