From the perspective of price, Libya's political mess is still front and center for oil industry observers because, at this point, it seems all but certain that Libya's production for 2011 is a lost cause. The political element of what is going in Libya has sort of been shuffled to the back burner, unless you are a big fan of global geo-politics.
Surprisingly or not surprisingly, Muammar Qaddafi is still in power in Libya, Africa's third-largest oil producer and home the continent's largest reserves. Sure, Qaddafi is hanging on by a thread, but the same was said about him in February. Here we are and it is mid-June.
It kind of reminds me of that scene in the ''Godfather II'' when one of the characters said Hyman Roth had been dying of the same heart condition for 20 years. In other words, the world can think Qaddafi's grip on power is tenuous. He could also still be in power a year from now.
All of this is my long-winded way of saying that Qaddafi is royal pain in the neck, to put it delicately, but the allure of Libyan oil riches was too compelling for some of the world's biggest oil companies to ignore. Back in March, we had a news story here on OilSlick about Qaddafi's attempt to essentially extort money from big oil companies to pay $1.5 billion in fines Libya was facing related to acts of terrorism. That story can be viewed (HERE).
There is a bit more drama to that story today after Bloomberg, citing documents filed by the company, reported Occidental Petroleum (OXY), the fourth largest U.S. oil company, hired an esteemed Washington law firm in 2008 to help get Libya exempted from legislation that allows American victims of terrorism to seize assets of the countries found liable.
Diplomatic cables released by the infamous whistle blower Web site WikiLeaks show many of the big boys of the oil business, Exxon Mobil, Chevron, ConocoPhillips, Royal Dutch Shell (RDS-A) and BP (BP), just to name part of the group, came to Qaddafi's aid. I am not defending the oil companies, but they were certainly in a bad spot here. As Bloomberg reports, this was matter of get Qaddafi off the hook or else. The ''or else'' being lost opportunities to tap Libya's plentiful oil reserves.
Beyond that less-than-appealing scenario, oil companies operating in Libya in 2008 were faced with the specter of not being too vocal about the legislation they opposed because it would have appeared as though they were attempting to diminish the rights of victims of terrorism. Talk about being caught between a rock and a hard place.
For their parts, ConocoPhillips (COP) and Exxon (XOM) refused to comment on the report as their right to do so, but this situation underscores an important point and that is dealing with folks that are not exactly stable, such as Qaddafi, is the lay of the land for big U.S. oil companies. And that gets us back to why the U.S. government should be encouraging more domestic exploration.
There is no getting around the fact that companies like Exxon, Chevron (CVX) and their peers will always have to operate in some unfriendly locations and do business with some unsavory characters, but this really is a case of less is more. As in less dealings with guys like Qaddafi is better for all involved.