what gadhafi's death means for gas pricesOil prices fell in the wake of last week's death of Col. Moammar Gadhafi. But it was a small dip, and it didn't last for long.

Still, while the Libyan dictator's death may not lead to lower gas prices for U.S. drivers in the short term, down the road improved world crude supplies should stabilize prices. That in turn would lead to fewer surprises at the gas pump.

Why Libya's Troubles Are Ours, Too

Though Libya only produces about 2% of the world's oil, even small disruptions in crude supplies can have a big effect on production and prices.

Before civil war broke out, Libya had been producing about 1.5 million barrels of oil per day. As output dried up, European refiners, which buy about 85% of Libya's output, were hurt badly and prices for Brent crude soared to as high as $127 a barrel in April.

Even though only about 3% of Libyan oil winds up in the U.S., gasoline prices in the U.S. surged on concerns about Libya. Gas prices now average $3.47 a gallon, up from $2.83 a year ago, according to the AAA Daily Fuel Gauge Report.

Many experts believe that it will be months before the Libyan oil sector is running at full capacity again. As the Associated Press notes, analysts expect Libya to produce 600,000 barrels per day by the end of the year and 1.6 million a day by the second half of next year.

If that prediction proves accurate, oil could drop by between $10 and $25 a barrel. However, prices may rise further amid concerns about other issues, such as rising demand from the developing world.

Libya's Opportunity ... Or Its Demise?

According to the U.S. Energy Information Administration, many experts believe that Libya's oil reserves, reported to be Africa's largest, have been underexploited, even though many foreign companies tried to do business with the Gadhafi regime when relations warmed between Washington and Tripoli after sanctions were lifted during the Bush administration.

With billions to be made, many companies will be willing to take the risk. But the results might be mixed.

ExxonMobil (XOM) returned to Libya in 2005 after a nearly 25-year absence. Later, it said a well that it drilled off the Libyan coast was not commercially viable. The enthusiasm of other oil companies also waned. Chevron (CVX) and Occidental Petroleum (OXY), which also came back, decided in 2010 not to renew their five-year license to explore for oil and gas.

Though it was not mentioned at the time, many oil companies were worried that Gadhafi would nationalize their assets. To further complicate matters, many foreign oil workers fled Libya in recent months as the fighting intensified.

Still, Libyan's light, sweet crude is especially attractive to refiners because it is easier for them to convert it into gasoline and diesel. Getting to it is just a little bit easier now that Gadhafi is gone.

Motley Fool contributing writer Jonathan Berr owns none of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Chevron.

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NOW will somebody ANYBODY explain to us ALL,why the USA CANNOT DRILL HERE ?....on land,not miles out in the ocean--drill in PROVEN AREAS and build a bleeeedin refinery ---just ONE to start ? expand the pipeline ? and WHY the same MORONS BLOCKING THIS have absolutely NO PROBLEMS with theeeeeeeeeee environment of all the opec punks,afrika and brasil ?........are people AWARE THAT WE ALSO IMPORT refined gasoline and the co$t of that as well ? WAKE UP . this is beyond pathetic.

October 25 2011 at 9:54 AM Report abuse rate up rate down Reply

who are we kiding

October 25 2011 at 9:16 AM Report abuse rate up rate down Reply

Why would the importing of Lybian oil lower our gas prices ? We export daily huge quantities of refined diesel and gasoline to Asia and other foreign markets. The oil companies daily take more out of our economy by these artificial increases than any government could spend in stimulus plans. And Washington does NOTHING !! ( i.e. Pres, Senate , House )

October 25 2011 at 8:34 AM Report abuse rate up rate down Reply

Over $94 a barrel now on hopes for a Euro bailout. Don't these maggots realize that bill will eventually come due? They can't pay their bills now. What on earth is so glorious about entire countries getting bailed out? It is a complete miracle that there exist no riots, chaos and violence at the NYMEX. You can forget about any recovery. There's no way we can recover when all they do is drown us with high energy prices. Quite honestly, I hope the US debt is downgraded by the other ratings agencies and major economies in Europe default all at the same time. Screw this slow pain, let's get this the fk on. Maybe, if the people of this country woke up all at the same time, these scumbags would fear coming to NY and London to trade us into hell the way they're being allowed to do now. The time is coming folks. We must do whatever is necessary to take this country back from these traitors.

October 25 2011 at 8:00 AM Report abuse rate up rate down Reply

I have no doubt that the new regime in Libya will give all its oil to the US out of gratitude to Obama.

October 25 2011 at 5:53 AM Report abuse rate up rate down Reply
1 reply to brawnydoc's comment

hey.......we're still waiting for obama to gas up our cars and pay all our bills so we don't have to worry about these things anymore ! .....remember that lady ???? aaaaaaaaand she WAS FOR REAL.

October 25 2011 at 9:50 AM Report abuse rate up rate down Reply

Dont Trust US Gov. now look 92.00 barrel from 85.00 in one week after Goofy Galfali death..... they dont want us to lower price of GAS and want everybody gets broke their budget and more layoff workers all crap to US GOV.

October 25 2011 at 5:27 AM Report abuse rate up rate down Reply

Americans continue to allow the oil companies to play games. Hiking prices every time a global incident makes the news is a ridiculous disease. Libya is but a miniscule drop in the American oil import scenario.

The USA will continue its downward spiral as long as the citizens allow the oil maggots to operate in Washington, DC.

October 25 2011 at 3:37 AM Report abuse rate up rate down Reply

Gas Prices really are not the subject of what now happens with the death of Gadafi. Were I libyan and in the country I would now be revolting against the people who were trusted to represent the people. These individuals apparently have now decided they will become the next dictators by establishing Islam and Sharia Law in the country. This will lead to taking away of Women's Rights there as well as subjecting the Women to further degrading treatment. I noted with interest the males first act was to institute the rights of the males to take up to Four Wives. Are the Women in this country who joined in the fighting to free their country really going to stand still for this? Will they allow the males to dictate to them what they can wear and where they can go and what they can do in both private and public? Will this mean degrding treatment will now be wrought upon the bodies of the these females because the men say it will be done according to Islam and Sharia Law? It looks to me as if the Civil War is only beginning there. I wonder if Mr. Obama knew this would happen when he approved the military use of the United States to overthrown a sitting leader and worse yet allow his murder without trial. At least Saddam was captured and given a trial before hanging him. He was given a burial according to the countries religious beliefs. Not sodomized, murdered and paraded around at the whim of a few individuals and prevented from having the burial the countries religion calls for.

October 25 2011 at 3:36 AM Report abuse rate up rate down Reply

Gas will creep down until the election, and then sky rocket again. Did anyone else hear the reason that Mobile/ Exxon made 7 billon last quarter . They sight high gas prices. I thought the price of gas was determined by the price of a barrel of oil. I think most people are in favor of capitalism, but when is it enough before it becomes treasonous.

October 25 2011 at 2:56 AM Report abuse rate up rate down Reply

greed controls the price of oil by fed,state county and retailer most of all.so why bother to even comment on it.we are a the largest part of the problem,blame only yourself.

October 25 2011 at 2:13 AM Report abuse -1 rate up rate down Reply