Possible Energy Effects of a U.S. Ban on Libyan Oil Imports

In response to a congressional request, GAO prepared an analysis of the energy effects of a U.S. ban of Libyan oil imports. Interruptions in the international oil market and international relations as a result of world response to U.S. trade sanctions could change the conclusions.

Under the current slack market conditions, a U.S. ban on importing Libyan oil is not likely to have a major impact on U.S. supplies or prices because: (1) the ban would not reduce world oil supplies; (2) current U.S. oil imports from Libya are small; and (3) oil is available from a variety of other sources. Libya could continue to produce and sell its oil on the world market but could experience a temporary loss of oil revenues until new customers are arranged. This ban would be successful in preventing direct imports of Libyan oil from entering the United States, but some indirect shipments could still legally enter this country which makes violation of the ban unlikely. GAO found that market conditions are the most important factors in determining the effects of a trade ban, since they determine the ease with which the United States can replace Libyan oil and Libya can continue to sell banned oil. In a tight oil market, a ban would maximize the potential adverse effects on the United States and maximize those on Libya. A tight oil market, however, is not expected in 1982. U.S. oil companies are more apt to be adversely affected by a ban than the United States as a whole. Although the United States currently imports a small amount of oil from Libya, its importance to U.S. oil supplies should not be completely discounted. Potentially higher future imports, its higher quality and importance to some U.S. refineries, and the concentration of its use on the East Coast are reasons for concern about the potential loss of Libyan oil.