Post-invasion oil scenarios vary widely
Associated Press
WASHINGTON — If the United States invades Iraq, there could be oil shortages and gas lines — or an oil glut and falling prices.
Much depends on whether American troops can secure Iraqi oil fields and whether other producers continue the flow of oil uninterrupted.
In the growing drumbeat over war with Iraq, the Bush administration rarely mentions oil, even though Iraq has one-tenth of the world's oil reserves. But a military campaign almost certainly will have a major impact on world markets.
In the event of a war, Secretary of State Colin Powell said recently, "We would want to protect those fields and make sure that they're ... not destroyed or damaged by a failing regime on the way out the door."
The growing prospect of war, combined with the monthlong political strife in Venezuela that is hamstringing that country's oil production, already has caused unease among energy traders.
Last week, prices for crude to be delivered in February jumped to more than $33 a barrel, 65 percent higher than a year ago. The average price of gasoline has risen steadily to more than $1.40 a gallon. On Dec. 26, pump prices in several cities jumped by as much as 20 cents a gallon overnight.
World oil stocks have been tight and fell sharply last week, the Energy Department says.
"The loss of Venezuelan oil is beginning to hurt," says Robert Ebel of the Center for Strategic and International Studies. "What people are beginning to worry about is suppose the loss of Venezuelan oil continues when we intervene in Iraq."
Together, Iraq and Venezuela produce about 5 million barrels a day. Ebel and other energy experts wonder whether increased production from other countries will be able to make up such a shortfall.
With global production at about 76 million barrels daily, a loss of several million barrels could cause prices to soar, economists say.
Furthermore, nearly 4 billion barrels of oil are in emergency stocks worldwide, including nearly 600 million barrels in a U.S. reserve. If withdrawn at 2 million barrels a day, the U.S. stocks could counter a disruption of 286 days, the administration told Congress this past summer.