Oil - Demand, Supply, and President Bush, pt 7
Posted by Moonage on 02 Sep 2004 | Tagged as: Oil Supply
Excellent post Calpinist.
Calpinist : The most contentious effect of Bush’s policies on the oil price, at least on this board, is the terrorism premium. Clearly the occupation of Iraq has not led to a decrease in international terrorism. One could even argue that it is responsible for the terrorist acts in Saudi Arabia and for the attacks on that country’s oil infrastructure. So far those attacks have not been successful, but if the Saudi oil supply could be only slightly interrupted, the oil price would go through the roof. Recent attacks in June, which didn’t cause a supply disruption, caused a spike in the oil price:
This paper has additional info about the potential impact of oil-terrorism in the ME.
Iraq’s Oil Sector One Year After Liberation
Saban Center Middle East Memo #4, June 17, 2004
Gal Luft, Co-Director, Institute for the Analysis of Global Security (IAGS)
…But a year after the fall of Saddam Hussein, and in spite of the fact that the war caused negligible damage to the country’s infrastructure (only ten wells were set afire), the prospects that Iraq will soon become one of the world’s leading oil-producing countries are growing dim. This shortfall points up a crucial but neglected aspect of the broader security failure in Iraq: the failure to secure Iraq’s oil infrastructure against insurgent attack.
A sabotage campaign against Iraq’s 4,300-mile pipeline system has crippled the country’s oil industry, hindering its ability to export crude. Iraq is producing around 2.4 mbd, of which 1.6-1.9 mbd are exported. However, these figures are currently declining. Data released by the U.S. Army Corps of Engineers show that crude production in May dropped to 1.95 mbd and exports are down to 0.86 mbd, the lowest level since last October.
…
Perhaps the most disturbing aspect of oil terrorism in Iraq is that it may become a new model for Islamist terrorists who seek to destabilize the region. Moving 40 percent of the world’s oil across some of the world’s most volatile regions, pipelines are attractive terrorist targets. A simple explosive device can put a critical section of pipeline out of operation for weeks. By going after energy infrastructure, terrorists can weaken regimes that depend on oil revenues for their survival and at the same time deliver blows to the global economy. Hence, success in keeping Iraq’s oil off-line might encourage other groups operating in the region to do the same.
Most disturbing of all is the possibility that the strategy of pipeline sabotage will migrate across the border from Iraq to neighboring Saudi Arabia, home to one-fourth of the world’s oil reserves and 80 percent of the world’s spare production capacity. Over 10,000 miles of pipelines crisscross Saudi Arabia, mostly above ground. Disruption of Saudi production in an effort both to weaken the House of Saud and to deny oil to the West would surely send tremors in global energy markets and, under some scenarios, could cause catastrophic environmental damage.
T.
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