thoughts on oil from New Zealand - I'm no economist, but there are certainly a lot of oil interests in the Bush administration. best, f.|
We hear that Iraq may be targeted by the US.
Now, if that is a fact, the attacks will remove Iraq production from the
marketplace. There could be knock on effects, by which I mean --> very expensive
The debate about an attack on Iraqi is heating up. But if an attack on Iraq
means soaring oil prices, and that, in turn means a longer and deeper recession
in the US, Sadam is probably safe.
Oil dropped as low as $US10 a barrel and soared above $US30 a barrel within the
past 30 months. The price more or less stabilised in the upper $20's during
most of this year, but it against nudged $30 after the terrorist attacks in the
US on September 11, only to fall below $20 as the rapidly deepening recession
ate into the demand.
At the moment, the fear in the Opec countries is that they cannot halt a renewed
slide towards the $10 mark, so they are trying to enforce a cut in the
production to hold up the price.
Opec has announced three production cuts this year, amounting to more that 3
million barrels a day, or 13 percent of its entire output. But it is now
seeking a further cut of 1.5 percent million barrels a day amount Opec
countries accompanied by a half-million barrel cut by the biggest non-Opec oil
exporters, which are Mexico, Norway and Russia. Since the Opec cut will only
happen if the non-Opec producers agree to their share of the cuts, this is by no
Russia, in particular, is playing for bigger political states during the crisis.
Moscow is trying to earn credit towards eventual membership of the WTO, the
European union and even the NATO by being helpful to the West on all sorts of
political, military and economical issues -- and it is a major Western interest
to keep energy prices low!
Given the steep fall in global demand for oil as the recession deepens --
airlines alone are expected to be using 400,000 barrels LESS a day by
December -- the price could continue to drift downwards even if the Opec package
of cuts go ahead.
But the volatility remains. It would be a different story if the 2.8 million
barrels a day produced by Iraq were suddenly removed from the worlds oil supply.
That would very least happen if the US attacked Iraq, as the Washington lobby
continues to urge.
If the Arab world , including its major oil exporters, were to close ranks and
impose an oil embargo in response to an essentionally unprovoked attack on Iraq,
the consequence could be as extreme as 1973. But even stopping the flow of oil
from Iraq would be enough to send to the price soaring well past $30 a barrel.
IF there was convincing evidence that Iraq was implicated in the terrorist
attacks on the US last September, popular pressure on the US Government to
strike back at Sadam Hussein might well be irresistible, but there is not.
There is only the general suspicion and hostility that permeates all American
dealings with the Iraqi dictator, plus a clique of bureaucrats was badly want to
finish off the job that the previous Bush Administration failed to accomplish
during the Gulf War 10 years ago.
That is not enough.
We are in the early stages of a global recession that has probably been made
worse by the events of September 11 and after, but it was already going to be
For the first time in 30 years, all three industrialised regions of the world --
North America, Europe and Japan -- are entering a recession together, and as the IMF has pointed out, it is unlikely in any case that the biggest, longest boom
of the past half century will be followed by a short, shallow recessions.
Just how long the recession will last matters to the Bush administration. It
will almost certainly last long enough to do the Republicans some damage in the
mid-term congressional elections that are now only a year away.
A really long recession could also destroy Bush's own hopes of re-election 2
Now consider: what single event would be most likely to kill an early recovery
and condemn the global economy to a very long recession?
That's right: soaring energy prices.
So how likely is it that President Bush will sanction an American attack on Iraq
that would send the oil price through the roof?
It has nothing at all to do with terrorism, it is all hard economics and