(LANA – Exclusive): Oil Price Fluctuations – How Do They Affect the Libyan Economy?

Report by: Ahlam Al-Jabali

Benghazi, July 29, 2026 (LANA) – As oil prices continue to fluctuate in global markets, particularly amid developments related to the U.S.–Iran conflict, attention is turning to how these movements will affect the Libyan economy, which relies heavily on oil revenues to finance public spending and provide foreign currency.

Brent crude, the benchmark used to price most Libyan oil exports, rose at the opening of trading on Wednesday to $84.80 per barrel, an increase of $2.69, or 3.28%, once again highlighting the Libyan economy's sensitivity to movements in global energy markets.

Economic experts told the Libyan News Agency that the impact of changes in oil prices extends beyond the volume of oil revenues to include public finances, foreign exchange reserves, the exchange rate of the Libyan dinar, and the state's ability to finance its development programs.

Global oil markets are influenced by several factors, including geopolitical developments, changes in supply and demand, and decisions made by the OPEC+ alliance. These factors make crude oil prices highly volatile, with particularly significant consequences for economies that depend heavily on oil as their primary source of revenue, foremost among them Libya.

Economic experts emphasized that Libya's continued dependence on oil as its principal source of income makes the country highly vulnerable to fluctuations in global markets, whether prices rise or fall. They stressed that diversifying sources of income and increasing the contribution of non-oil sectors are fundamental to achieving more sustainable economic stability.

Economic expert and public expenditure specialist Amraji Ghayth stated that Libya depends on oil for approximately 95% of state revenues, meaning that any change in oil prices or production levels has a direct impact on government resources and its capacity for public spending.

Ghayth added that Libya can control its production levels according to its own circumstances and capabilities, while oil prices remain beyond its control because they are determined by global market dynamics, international tensions, and resulting changes in supply and demand.

He explained that higher oil prices benefit the Libyan economy by increasing oil revenues and foreign currency inflows, thereby strengthening the government's ability to finance public spending, open letters of credit, and provide the foreign exchange needed for imports.

He further stated that rising oil prices increase foreign currency earnings, improve the state's capacity to finance expenditure, facilitate the opening of letters of credit, provide foreign currency for imports, and meet citizens' needs. Conversely, falling prices reduce revenues, decrease foreign currency inflows, and make it more difficult to provide foreign exchange.

For his part, Dr. Helmi Al-Qamati, Head of the Economics Department at the University of Benghazi, said that oil is not merely an export commodity for Libya but the backbone of the national economy, serving as the primary source of public revenues, foreign currency, government spending, and stability of the Libyan dinar.

Al-Qamati explained that higher oil prices improve the state's financial position, noting that increased oil revenues positively affect the balance of payments and foreign exchange reserves.

He added that higher oil prices lead to increased revenues, improvements in the balance of payments, larger foreign exchange reserves, and greater capacity for the Central Bank to provide foreign currency and finance imports.

Al-Qamati also pointed out that declining oil prices place direct pressure on public finances.

He said that lower prices result in declining government revenues, widening fiscal deficits, reduced foreign currency inflows, increased pressure on foreign exchange reserves, and higher demand for U.S. dollars, which may affect both the exchange rate and the country's fiscal policy.

He added that Libya is affected not only by global oil prices but also by fluctuations in production levels caused by political and security conditions, making oil revenues even more volatile and complicating financial planning.

Al-Qamati emphasized that higher prices do not guarantee lasting economic stability, explaining that recent increases in oil prices may provide additional short-term revenues but cannot ensure long-term stability because oil prices are inherently volatile.

He noted that the real challenge lies in investing oil revenues to build a more diversified economy, controlling public spending, and strengthening the contribution of non-oil sectors.

Meanwhile, former Minister of Economic Affairs and Chairman of the Competition and Anti-Monopoly Council, Dr. Salama Al-Ghweil, stated that fluctuations in oil prices are a key factor shaping the direction of Libya's economy due to the heavy reliance of public finances on oil revenues.

Al-Ghweil said that oil price fluctuations are not merely numbers in global markets but a major determinant of Libya's economic performance because of the government's significant dependence on oil income.

He added that higher prices give the state greater capacity to finance salaries, public services, and development projects while strengthening foreign exchange reserves, thereby contributing positively to economic stability.

By contrast, lower prices increase pressure on the state budget, delay some development projects, widen fiscal deficits, and negatively affect economic activity and the quality of public services.

Al-Ghweil stressed the importance of moving beyond reliance on oil as the sole source of income.

He said that achieving economic stability should not depend solely on higher oil prices but rather on building a diversified economy and investing oil surpluses in productive sectors such as industry, agriculture, renewable energy, and logistics services, while also improving revenue management, strengthening transparency, and diversifying sources of national income.

Economic experts generally agree that Libya's economy will remain closely tied to developments in global oil markets as long as oil revenues continue to represent the country's primary source of public income. They concluded that diversifying the economic base, rationalizing public spending, and investing oil revenues in sustainable productive projects are essential pillars for strengthening financial and economic stability and reducing the impact of future oil price fluctuations.