CRUDE prices are still rising. The blame game is on. The impact of the higher than anticipated crude prices on the global economy is still far from certain. Thankfully it has not pricked the bubble, as yet. However, uncertainty exists and global economy managers are keeping a close eye on the effects of the rising oil price.
Pressure has been brought on the OPEC oil-producing members to arrest the trend in the oil markets. However, the vows of the producers and the announced rise in production, not withstanding, the crude markets continue to make their way, higher and higher. The war in Iraq, without doubt, has contributed very significantly to the fear premium that the markets are currently being forced to cough up. What if there had been no invasion of Iraq? Where would the prices be today? This is a million dollar question. Different figures are being projected and people differ in their analyses of the markets, had the decision been different.
A congressional committee in Spain has recently concluded that had there been no war on Iraq, oil price today would have in the vicinity of $30 a barrel. Even in this scenario of elevated oil prices, the OPEC producers are looking forward to maintain prices around $30 a barrel band. Had there been no war on Iraq, the world would have been enjoying a price of very much around that OPEC elevated target band. That means all other conditions, same as currently, the fear premium and the impact on crude prices because of the Bush war on Iraq is roughly around $20 a barrel. A staggering figure indeed!
The war on Iraq has impacted many elements of the delicate demand-supply balance in the global crude markets. After nearly a year and a half of the US invasion, the Iraqi oil infrastructure is in doldrums. There is a regular sabotage of pipelines carrying Iraqi oil to the energy thirsty world. Refineries in Iraq are constantly under threat of attack, resulting in compromised refining capacity in Iraq.
At the last count, the northern pipeline that carries oil to the Turkish Mediterranean port of Ceyhan has been blown up 37 times in 12 months. Terminals in the south at Basra have been attacked at least 10 times shutting down all exports of crude oil. No one today really knows where the Iraqi oil revenues are going and how much of any revenues reach the Iraqi people. Graft and corruption are widespread by all accounts.
How badly the American adventure of seizing oil by power has backfired is manifested by the fact that America today supplies Iraq with gasoline and diesel fuel, as the Iraqi refineries have been destroyed and looted and kidnapping of those involved in repair work of the Iraqi oil infrastructure has resulted in halting the ongoing the rehabilitation work, in most cases. The Iraqi oil infrastructure is in shambles. Of the $18 billion, sanctioned by the US Congress for Iraq, only less than one billion could be accounted for as disbursed for that exact purpose.
As the situation in Iraq, stands today, if the turmoil in the Iraqi oil industry, which Iyad Allawi and the American troops have failed to prevent, is coupled by accident with any disruption anywhere else in crucial places, as far the oil production is concerned, oil prices will be on fire, every one concedes. The American war on Iraq has brought the world on its knees, as far security of energy supplies are concerned.
Who is then to be blamed for the current woes of the global crude markets, the US war on Iraq or the oil producers from the Gulf? Who let the world down? A million dollar question indeed, and the choice are yours. However, regretfully it is of academic interest only today.
