|US to dominate oil supplies, experts predict
|George Bush’s war speech on Tuesday sent jitters in world oil markets. Bush was clear when he warned Iraq against setting fire to its oil wells.
With crude oil prices still on the rise, energy analysts suggest a short, quick war on Iraq would bring oil prices down from the current levels.
"History would suggest prices would go down fairly rapidly, maybe a $5 to $7 a barrel within one day," said Angus McPhil, an Edinburgh-based analyst. "We are adamant that oil prices will fall."
In a worst-case scenario, a long war is certain to inflame regional hostility toward the US and could lead to another Arab oil embargo. Industry officials in the US and Britain say a change of regime in Iraq would pave the way for their firms to enter Iraq.
"Over the years, the US has set about formulating policies to bar Arabs from using oil as a leverage in attaining political objectives," said Dr Alawi Kayal, Saudi political analyst. "Today, the US is in control of the larger portion of the oil in the Gulf. Being an impressive source of financing the US economic deficits, oil in the Gulf is a US factor in controlling the world," he added.
The evacuation Tuesday of all UN staff working in Iraq, including the humanitarian workers, heightened the oil market’s skepticism over the situation in Iraq. The oil-for-food program was also halted by the UN following the evacuation of the programs’ officials from Iraq.
The International Energy Agency warned last week that further disruption in oil supplies from Iraq would eventually affect international oil reserves. The agency noted many markets today are running short due to exceeding consumption.
Oil experts, however, believe the IEA’s statistics for February show abundance of oil in world markets, thanks to the steady and increased production of the Organization of Petroleum Exporting Countries.
At 24.5 million barrels output a day, OPEC pumps one-third of the world’s crude. Last week, OPEC’s member states indicated their readiness to boost output so as to cover any shortages arising from war.
Iraq has proven reserves of 112 billion barrels of oil with a further 200 billion more awaiting discovery, according to the oil industry experts. Oil consultants believe the development of Iraq’s oil fields to attain full potential over the coming 10 years will cost $40 billion.
The American and British oil companies are expected to be the long-term beneficiaries of the war on Iraq. Experts say it would make sense for US and British firms to get a significant share of any repair and development work in postwar Iraq.
"Iraqi oil resources could satisfy current US imports for almost half a century," a report by the American Academy of Arts and Sciences stated last year. The report, titled "War with Iraq: Costs, consequences and alternatives", noted that "in the postwar era, the first decision Iraq’s new rulers will face is whether to remain in OPEC." Such a decision, added the report, will be dictated by American interests.
Issam Al Chalabi, an Iraqi oil consultant, believes the Americans will dominate future Iraqi oil supplies. But France’s Total Final Elf said it will not cede the fields to the US and Britain.
Total’s CEO, Thierry Desmarest agrees France’s opposition to the US war on Iraq would make his company’s standing in Iraq "more complicated."
However, he is confident the company could win new contracts if it has the chance to engage in good-faith negotiations with its American rivals.
"We have shown in the past that we are able to defend ourselves on an equal footing with our peers even in some areas where there was a reputation of significant American influence," said Desmarest, whose company until last year was negotiating with Iraqi officials on a $7 billion agreement to develop two of the country’s largest oil fields, Majnoon and Nahr Bin Omar.
Following the 1991 Gulf War, the US government prohibited American firms from engaging in commercial activities or business negotiations with the Iraqi government. The 13-year-old UN sanctions barred foreign companies from investing in Iraq’s oil sector.
For Sheikh Zaki Yamani, former Saudi Oil Minister, oil prices could exceed $60 a barrel if supplies from some of the OPEC member states such as Kuwait and Saudi Arabia were interrupted. He is sure, however, that a short and successful war against Iraq could push prices below $25.
War fears of oil supplies shortages also stir Tokyo, where Japanese Prime Minister Junichiro Koizumi told his cabinet Tuesday to closely monitor the foreign exchange and oil markets to ensure stability. Japan’s Minister of Economy, Heizo Takenaka was quoted as saying the Iraqi situation warranted closer communication with the Bank of Japan and stock exchange.
The withdrawal of UN staff from Iraq didn’t help assurances by the US and UN officials that they envision a UN presence in Iraq after the war, particularly in the area of humanitarian assistance.
"To achieve this vision, we will work closely with the international community, including the UN," Bush said in his address.
The Wall Street Journal reported Monday the Bush administration is working on a reconstruction plan that could sideline UN’s development agencies and other multilateral organizations by awarding lucrative rebuilding contracts to American companies. Such contracts are expected to include the oil wells.
"We should avoid the common fallacy of thinking that the US or any country can insulate its economy from an oil shock because it imports from ‘safe’ sources," the AAAS report pointed out. "As long as oil prices are determined by the oil market, oil is a fungible commodity, and a price shock anywhere affects importers everywhere."
Ghassan Joha and combined agencies