World Oil Market, 'Old Calendar' vs New Reality: Analysis

english.peopledaily.com.cn Last updated at: (Beijing Time) Thursday, March 13, 2003

Along with more than 200,000 American soldiers gathering at the Gulf Area the US war against Iraq is now at a point of touch-and-go. At present, the worries induced by the US-Iraqi War has already effected a great impact on the world oil market, making the world economy in the course of recovery to confront a new pressure. Along with more than 200,000 American soldiers gathering at the Gulf Area the US war against Iraq is now at a point of touch-and-go. At present, the worries induced by the US-Iraqi War has already effected a great impact on the world oil market, making the world economy in the course of recovery to confront a new pressure. However, some persons in the US hold that once the war is kicked off the world oil price will see a quick downturn and the pressure exerted on the world economy will be alleviated along with it. Whether the prediction is correct or not has incurred doubts among many people of the world. History has really witnessed a surprising similarity. At present when the US is about to launch war against Iraq it has made the oil price to approach the price level as happened in the Gulf Crisis some 12 years ago. Those, holding the view that once the war begins the oil price will soon go down, do not mean that they have a loose tongue. In 1990 when Iraq intruded into Kuwait, causing the eruption of the Gulf War the world oil price had once shot to over US$ 41 per barrel. But when the multinational troops headed by the US launched the "Sandstorm" attack the oil price immediately went down, and to somewhere near US$ 25 per barrel not long afterwards. The problem is that the situation has changed and things are no longer what they were in the past. Can the "old calendar" of some 12 years ago be adaptable to the situation at present. This is really a very big question mark. Doubt 1, if the old calendar will spell any good lies in whether the supply and demand of the oil can be balanced quickly in the world. The discontinuation of the oil export from Iraq and Kuwait brought about last time by the eruption of the Gulf Crisis and international embargo immediately led to the daily reduction of 4.5 million barrels in world crude oil supply. To fill the gap, Saudi Arabia, world No.1 oil producing country at once increased its oil output, which witnessed a daily additional output of 3 million barrels in a very short time, thus making up the two thirds of the output losses in Iraq and Kuwait. And accordingly other countries also made efforts to make ensure the crude oil supply. For the moment, the average daily consumption of oil is 78 million barrels, an increase of over 15 percent as against that of 67 million barrels in 1990. But judging from the situation of the OPEC there is not much strength left for further exploitation since most of these countries are actually engaged in overexploitation of the oil production. Whereas some 12 years ago the surplus productivity of the OPEC countries reached 7.5 percent of the global oil-needed amount, but now this has been reduced to around 2 percent. Except the Saudi Arabia, the other countries see not much productivity left for increasing oil production while the restoration of oil exportation from Venezuela, one of the major oil-exporting countries in the world still needs sometime to manoeuvre. Doubt 2, whether the old calendar will work lies in the low oil reserve leading to the fragility of the market resistance to the fluctuation of oil price. Though the US, starting from the yearend of 2001 increased its strategic oil reserve the world reserve of the commercial oil in general is on the decrease. We've witnessed that the US commercial oil reserve has recently gone down to its bottom-line never occurred in a few years time before. According to the statistics provided by the "Wall Street Journal" the commercial oil reserve of the industry-developed countries saw a supply of some 65 days in 1990 but now it is reduced to 52 days only. Besides, presently we have seen come forth some complicated factors basically rare to have seen some 12 years ago, included in which are the worries brought about by the terrorist attacks. For example, the finely equipped and well-trained US navy has every capability to cope with any form of military attack from any of the Gulf countries. It is yet a question mark whether it is able to effectively put to stop any terrorist activity by an ordinary way on the oil shipping-line. The US warship and the French oil tanker have in recent years been confronted with the terrorist destruction by small vessels in a suicidal way. This is a new problem the western countries are faced with after the "9.11 Incident". Whether the old calendar can spell any good for, or whether it can be fully applied to the new reality that we are facing today is a new ordeal brought about and put before the US military attack on Iraq by the world oil market. It is also a question of great importance that deserves close attention of the world. By People's Daily Online