Libya and Commodity Prices

From an article in today’s The Globe and Mail:

“Oil prices surged today after coalition strikes on Libya, prompting concerns over what the conflict could mean to the crude market and the global economy, already touchy after the devastation in Japan.

Analysts question how Libya’s oil infrastructure will emerge from the UN-mandated action in the country, which represents about 2 per cent of world crude supply, The Globe and Mail’s European correspondent Eric Reguly reports today.”

Given that the market price of several commodities varies positively with the price of oil because of transportation costs, this likely means that commodity prices will increase further. This also means that food prices in the United States, even though they have not yet increased significantly relative to food prices in other countries, may finally do so.

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