The oil markets have plenty of reasons to be spooked. In Libya, home to Africa’s largest reserves, production has fallen more than 80 percent since militias seized control of the country’s biggest ports last summer. Most of Iran’s oil remains trapped as well. Sanctions aimed at punishing Iran for its nuclear weapons program have crippled its crude exports by 1.5 million barrels a day. Nigeria is in the midst of its worst oil crisis in years: Rising violence, plus rampant sabotage and theft, have knocked out about 300,000 barrels of oil output a day. In Venezuela, which has the world’s largest oil reserves, production has remained unchanged after years of underinvestment.
Political chaos and violence are keeping 3.5 million barrels of daily oil production off the market, according to estimates by Citigroup. With tensions heating up over Ukraine, pressure is building for Western countries to impose Iran-style sanctions on Russia, the world’s largest oil producer. That would likely send prices soaring and push Europe, which gets 30 percent of its oil from Russia, into recession.