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> >Btw, the oil company stuff doesn't fly. If the boycotts come >off as a result of a regime change, Iraq returns to 100% >production and the price of oil plummets. Not good for >ExxonMobil and the other oil companies, not good at all (not >to mention that a war in that region puts the bulk of their >supply at risk). Politically, that might be useful in >dealing with Saudi and the other OPEC nations, but that is a >political issue, not an industry issue.
Macleans weekly in CANADA has a slight different take on that as below. AGB
World October 7, 2002
NOT FOR JUSTICE, BUT OIL
Installing a friendly regime in Baghdad could provide the U.S. with cheap fuel
TOM FENNELL with WILLIAM LOWTHER in Washington
LIKE AN AGGRESSIVE prosecutor, Prime Minister Tony Blair stood in the British House of Commons last week and laid out the case for toppling Iraqi dictator Saddam Hussein. Citing a 50-page British intelligence dossier, he warned that Iraqi forces have the capability of firing weapons carrying anthrax and nerve gas within 45 minutes of receiving an order from Saddam. The Iraqis, said Blair, also have mobile germ warfare laboratories and are trying to buy uranium for their nuclear weapons program from an African country. But many MPs and foreign leaders remained unconvinced, claiming the report contained nothing new. Labour MP Alan Simpson also questioned the motives behind the push to bring down Saddam. "President Bush needs to do this to satisfy his thirst," he said. "But his thirst is not for justice but for oil." Photo: Hussein Malla/CPp Archive View Full Size Photo Refineries like this one northwest of Baghdad could again be operating flat out
In the list of reasons given by Washington for ousting Saddam in recent months, oil is rarely mentioned. But American foreign policy in the Middle East is still deeply influenced by the 1973 Arab embargo, which drove the price of oil from US$3 a barrel to $12, triggering galloping inflation and pushing the U.S., Canada and Europe into a deep recession. America now depends on the Middle East for 27.5 per cent of its oil, and that figure is expected to climb dramatically in the coming years. By installing a regime friendly to the United States in Iraq, which controls 11 per cent of the world's oil supply and has massive untapped reserves, George W. Bush would ensure the U.S. has cheap crude for years. "Oil is at the centre of our Middle East policy," said Charles V. Pena, a former U.S. Defense Department adviser. "Everything we do in the region is ostensibly to ensure ourselves a cheap supply." Talk of war has already pushed the price of oil from $19 a barrel earlier this year to a 19-month-high of $31. There is little relief in sight. At a meeting in Osaka on Sept. 20, the Organization of the Petroleum Exporting Countries, which includes Iraq, said it would not boost production to bring down the price. The high cost, OPEC officials claimed, amounted to a "war premium" triggered by the threat of an invasion of Iraq. "I think they are political prices, not market prices," said Qatari oil minister Abdullah bin Hamad al-Attiyah.
The price could become even more political. The U.S. is struggling to stay out of recession, the European economy is slowing and Japan is trying to avoid falling back into recession. A prolonged spike in oil prices to even higher levels would put a brake on already sputtering economic growth in the West, possibly triggering a global recession. Ironically, when prices soared to nearly $40 a barrel during the Gulf War in 1991, it helped push the U.S. into recession and cost Bush's father the White House.
Now Bush the younger risks falling prey to the same scenario. According to Vincent Lauerman, global energy strategist at the Canadian Energy Research Institute in Calgary, how high oil prices go will depend on how quickly Saddam is toppled once war breaks out. If the regime is easily defeated, Lauerman says, prices will spike to $35 a barrel and then quickly drop to the $22 range with little negative impact. But if the battle is prolonged inside Iraq, he predicts the price will jump to $40 and, if fighting spreads to neighbouring countries, it could hit $50 before eventually settling back somewhere into the mid-$20s.
If the war goes badly, OPEC could help rescue consumers by flooding the market to drive the price down. But OPEC's decision will be tempered by Arab reaction to the fighting, says Matthew Janisch, an oil expert and managing director of BMO Nesbitt Burns in Calgary. If there is widespread unrest in Arab capitals it will be difficult for OPEC to raise production. And non-OPEC countries, including Russia and Canada, won't be able to help, adds Lauerman, because they're already pumping at full capacity and have no excess supplies.
In the long run, the picture is better if the U.S. is able to install a friendly regime. Officially, Iraq, currently under an embargo, is exporting almost one million barrels a day under a UN aid-for-oil program that allows the country to sell oil and use the proceeds for the purchase of food, medicine and other humanitarian supplies. Analysts believe a pro-U.S. regime would likely turn the oil fields over to American firms to develop. Once producing fully (between five and seven million barrels a day), Iraq would boost world supplies by almost six per cent and bring down the price. "The increased production would have a very, very significant effect on world oil prices," says Kyle Cooper, an oil analyst with Solomon Smith Barney in New York City. "You're probably looking at prices in the upper teens."
American control of Iraqi oil would also produce two other changes the White House would welcome. A dramatic increase in supplies could weaken, or even lead to the collapse of OPEC as member nations attempt to maintain market share by stepping up production. "You'd get an oil war as the Saudis pump more to protect their share," says Cooper. "That would push prices down even more."
Bringing massive amounts of Iraqi oil to market could also free the U.S. from its dependence on Saudi Arabia, which now accounts for almost 15.25 per cent of U.S. oil needs. For Washington, that dependency is problematic: some U.S. national security planners believe the Saudi royal family may be destabilized by Islamic militants in the near future, or the country may disintegrate in a civil war as rival factions in the ruling family battle to replace King Fahd, who is 81 and dying. But the availability of Iraqi oil would all but eliminate the U.S. need for Saudi Arabia.
The U.S. energy sector, an industry that Bush, Vice-President Dick Cheney and National Security Adviser Condoleezza Rice have close ties to, would quickly move into Iraq. (Bush once owned an oil company, Cheney ran one, and Rice is a former director of Chevron Corp. and has an oil tanker named after her.) And oil companies from a number of other countries, including France, China and Russia, have interests in Iraq. Nervous that they might be excluded by a pro-American government, their representatives have met with exiled Iraqi opposition leaders in Washington in an attempt to ensure their position in the country in the post-Saddam era. But those opposition leaders, Pena says, made it clear they won't be bound by any agreements Saddam made with foreign oil companies.
Bush's drive to launch an offensive against Saddam seemed to gain ground in Washington as Congress, at week's end, discussed a resolution to authorize the President to use ground forces in Iraq. British and U.S. officials also drafted a UN Security Council resolution that would give Saddam two months to fully co-operate with arms inspectors or face military retaliation. But foreign leaders continued to express doubts about an invasion. In Ottawa, Jean Chretien said there is still not enough evidence to warrant an attack, while French President Jacques Chirac and Chinese Prime Minister Zhu Rongji voiced similar concerns. But it is unlikely that Saddam will give inspectors full access to Iraqi installations. And that will mean that the drumbeats of what some are calling a war for oil will only increase in the days ahead. Copyright by Rogers Media Inc.
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