But for all his eccentricities, Gadhafi has ensured that much of his country's oil wealth goes back to the people, making Libyans richer than some of their Arab neighbors, even if they don't have the same freedoms.
Now fears are spreading that Gadhafi, feeling cornered and desperate as his power slips away, could try to destroy the very lifeblood of his economy -- its oil fields. The worry is that Libya's notoriously unpredictable leader would rather wreck his country than see it ruled by anyone else.
Such fears are most pronounced in the country's east, which is now largely in the hands of local militias and Libyan soldiers who've switched sides, joining pro-democracy protesters in rallies against the regime. Cell phone videos passed to journalists crossing into eastern Libya from Egypt purport to show foreign mercenaries Gadhafi apparently hired to attack his own people. Such a leader is capable of anything, some say.
Reports are now emerging that Gadhafi has ordered some elite security forces to start sabotaging oil facilities, beginning by blowing up several oil pipelines, cutting off flow to Mediterranean ports. A source close to the Gadhafi regime told Time magazine's intelligence columnist, former CIA field officer Robert Baer, that attacks on oil facilities are meant to serve as a direct message to Libya's tribes: It's either me or chaos.
Libya is an OPEC member and Africa's third-largest oil producer, behind Nigeria and Angola. More than a week of unrest there has already disrupted some crude oil exports, which, coupled with political uncertainty across the Middle East, has pushed up prices. Oil is trading at more than two-year highs today on the New York Mercantile Exchange.
The oil sector makes up 95 percent of Libya's export earnings and more than 80 percent of government revenues. Without it, any future government would have trouble duplicating the quality of life for citizens under Gadhafi's rule. That might be exactly the point Gadhafi is seeking to make.
"Libya has traditionally subsidized basic foodstuffs and things like electricity and power. It would make a significant difference if oil wasn't there," Charles Gurdon, a Libya expert who runs Menas Associates, a political risk consultancy in London, told AOL News.
But Gurdon said he doesn't believe Gadhafi could wreak immense damage on his country's oil infrastructure and still stay in power for any sustained period of time.
"He could try, but the majority of Libya's oil infrastructure is in areas probably outside his control, in areas towards the east. There are also gas supplies going west from Tripoli, which could be attacked," he said, but "they'd have to use aircraft to do it rather than troops."
"It's possible, but it's sort of a scorched earth policy," Gurdon said. "By cutting off exports, it's not going to make much difference in terms of revenues or anything else. Basically, you bring down the house on top of you."
Unlike Gadhafi, many Libyans in the country's east, close to the oil fields, belong to different ethnic tribes and have long complained of discrimination by his regime. They've seen less development and infrastructure projects as a result of the country's oil wealth, compared with those living in Gadhafi's ancestral home farther south or in the capital Tripoli. Ironically, it's those easterners whom Gadhafi might seek to hurt by destroying the oil infrastructure who might be best able to survive such tactics.
"The east has been starved of finance and development and infrastructure for a very long time, so I'm sure they could cope better than Tripoli," Gurdon said.
On the other hand, eastern Libya is hardly unified, despite the disparate tribes' unity in opposing Gadhafi. Under the Libyan leader's 41-year rule, few tribal groups were allowed a hand in governance, leaving them with no prior experience in governing should Gadhafi fall. Chaos and civil war could ensue.
Nevertheless, there have been moves to safeguard Libya's infrastructure, oil-related and otherwise. Libyan troops who've defected from Gadhafi's ranks manned checkpoints near the Egyptian border this week, stamping passports with some semblance of order. Airfields in the east have been secured to prevent any unauthorized landings of mercenaries or government-loyal troops.
Regardless of whether Gadhafi moves to attack his country's oil pipelines, the industry has already suffered, and many questions remain about its future. With Libya's military beginning to crumble and switch sides, who will guard oil installations? And with foreign oil staffers evacuating, production by major oil companies operating in Libya could be on hold for a while. About a fifth of the country's total production has already been halted.
Repercussions could also extend well beyond Libya's borders. Libyan oil makes up a fourth of Italy's total demand. The Italian energy company ENI, which is partially state-owned, does 15 percent of its business in Libya. Thus oil shutdowns could reverberate through the already battered European economy. Some 85 percent of Libyan crude exports go to Europe, with only 5 percent to the U.S.