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  1. AnnaPhylaxis

    470 Posts.

    Oil may hit $80 a barrel in war with Iraq -experts
    Tuesday November 12, 4:30 pm ET
    By Tom Doggett

    WASHINGTON, Nov 12 (Reuters) - Crude oil prices could triple to $80 a barrel during the first quarter of next year and strangle the world economy under the worst case scenario of a U.S. attack on Iraq, energy experts said on Tuesday.

    Crude prices are likely to spike that high if Iraq destroys its oil facilities while retreating from U.S. forces, Iraq uses weapons of mass destruction, and key oil facilities in next door Saudi Arabia and Kuwait are damaged by Iraqi missiles.

    That is the conclusion of energy experts who met at the Center for Strategic and International Studies think tank (CSIS) to discuss the impact of a U.S. war against Iraq on the oil market.

    Such a huge jump in oil prices would devastate the global economy, which is already struggling.

    "All you need is $40 oil to bring the economy to a complete standstill. If we have $80 oil we're going to be in the hole," said Adam Sieminski, global oil strategist at Deutsche Bank.

    Consumers would be hit with skyrocketing gasoline prices at the pump. The price crude oil accounts for about 44 percent of cost for a gallon of gasoline.

    Commercial jet fuel prices might not take as bad a hit, because the U.S. military has been planning for an attack on Iraq and has stockpiled fuel for its fighter aircraft, the experts said.

    Under the worst case war scenario, after oil hit $80 a barrel in the first quarter prices would eventually decline to $60 in second quarter, and then fall to $50 in the third and fourth quarters, according to CSIS analysis.

    Currently, a barrel of crude trades for about $26 at the New York Mercantile Exchange.

    The Bush administration could help calm the energy markets by announcing ahead of an attack on Iraq that it planned to release oil from the U.S. Strategic Petroleum Reserve.

    The reserve, which was created by Congress in the mid 1970s after the Arab oil embargo, currently holds 589 million barrels of oil in deep underground salt caverns located at four sites in Texas and Louisiana.

    "You have to be prepared to make an early release of the reserve," said Larry Goldstein, President of the Petroleum Industry Research Foundation.

    Goldstein said President George W. Bush would not have to actually draw down the emergency oil stockpile, because just the prospect of putting more crude in the market could stabilize prices.

    "I think the simple announcement of our intent (to use the reserve) would go a long way to calm the market ... we don't even have to follow through," he said.

    Sieminski said Bush could wait until the war had begun to tap the reserve.

    "My fellow Americans our troops are in Iraq and by the way I'm releasing oil from the Strategic Petroleum Reserve," Sieminski said about what Bush could tell the public at the start of an attack on Iraq.

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