Libyan oil production may not return to recent levels if Muammar Qaddafi is overthrown, following a trend set by fellow OPEC members Iran and Venezuela when their own governments last changed, according to a Baker Institute analyst.
The CHART OF THE DAY shows the level of oil production in Iran falling after the Shah was overthrown in 1979 and Venezuela’s output sinking since Hugo Chavez was elected president. Government ousters may have the side effect of chasing out experienced energy industry workers, presenting challenges to maintaining wells, pipelines and refineries.
“You could see, in the case of Qaddafi being overthrown, particularly if it’s violent, prolonged diminished capacity from Libya,” said Ken Medlock, an energy fellow at the James A. Baker III Institute for Public Policy at Rice University in Houston, in a telephone interview. “Regime change, even if it’s good for democratic movements, it’s generally not good for technical industries.”
Iran pumped 5.2 million barrels of oil a day the year before the 1979 Islamic Revolution. After mass protests brought Ayatollah Ruhollah Khomeini to power, output sank to 1.3 million barrels a day in 1981 before rising to 3.7 million last year.
Venezuela’s daily output hasn’t surpassed 3 million barrels since Chavez took power and tightened his hold on state-owned Petroleos de Venezuela SA. Strikes lowered oil production to less than 1 million barrels a day in 2002.
“There’s a tremendous amount of logistical detail involved in oil production and if you begin to shut down the chains of command, then logistical detail is thrown out the window basically and it becomes very difficult to maintain any semblance of what you had prior,” Medlock said.