Libyan Leader Gaddafi Threatens to Nationalize Oil and Violate OPEC Regulations

Sources: UPDATE 2- Gaddafi Says Looks At Oil Firm Nationalization, Reuters UK; Gaddafi Threat to Nationalize Energy Assets, Financial Times

Colonel Muammer Gaddafi, the Libyan leader, has threatened to nationalize oil reserves and violate OPEC production quotas as a measure against low oil prices.

In both a video conference with Georgetown University and a Spanish press conference, Gaddafi claimed that oil prices would have to rebound before the threat of energy nationalization was removed. Specifically, he told Georgetown students that oil prices would have to reach $100 per barrel.

Gaddafi also told Georgetown students that Libya would not adhere to OPEC regulations because of his nation’s dependence on oil revenues. He did not detail how and when Libya might derogate from OPEC quotas, however.

Most recently, during a dinner in Tripoli, he made comments regarding nationalization that were seemingly directed at executives of the Spanish company Repsol, the largest single investor in Libya’s hydrocarbons sector.

Gaddafi has also indicated through the Libyan press that he hopes that the country’s top executive and legislative bodies should vote to nationalize oil firms in the next few days.

The Libya economy’s loss in revenue due to low oil prices has been compounded by the fact that the government entered into billions of dollars of contracts to improve infrastructure when oil prices were high. This in addition to the global economic crisis has Gaddafi worried that nationalization might be necessary.

Discussion: Do you think that these are empty threats? How would nationalization affect hydrocarbon investment into countries like Libya in the future? How do you think OPEC will respond to violations of its production quotas?