The best laid plans of mice and men
or
A funny thing happened on the way to Middle-East democracy
Oil prices and the war in Iraq
The six members of the Gulf Cooperation Council, or GCC, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates are experiencing greater growth then they have since the 70s.
As oil prices reach new highs their, gross domestic product, has grown by 17%, in Saudi Arabia, this has meant that in three years, revenue from oil exports, are greater than for all of the 1990s.
The neo-con dream of Iraq oil flooding the market, to offset OPEC and render them obsolete, is now proving to have been a pipe (line) dream. Before sanctions Iraq pumped 3.5 million barrels a day, under the UN food for oil program Iraq pumped 2.5 million barrels per day, and under occupation, Iraq pumped 1.6 million barrels per day, of course a major reason for the decline was that oil production facilities in Iraq have been attacked almost 300 times since the invasion.
Not that it would really matter if Iraq had doubled production, China is now the second largest consumer of oil after the US, and they have accounted for nearly a 40% increase in demand. Couple that with our own growing thirst, as exemplified by the fact that the Corporate Average Fuel Economy of the vehicles produced by Ford today, are less than those of the Model T. Add Indias growing demand, along with the rest of the developing world, and low priced oil is a thing of the past. The demand for oil in developing nations is growing so fast that Indonesia, an OPEC member, is a net importer of oil now.
Current world demand for oil is around 85 million barrels per day and is expected to be close to 88 million barrels per day by 2006, as globalization redistributes revenues, greater demand will be coming from those nations that have not been traditionally large consumers of oil.
While the instability of the Middle East adds a certain premium to the price of oil, the increase in oil prices is demand driven and the war has had little to do with it, and increased refinery capacity will be a rather short-term moderator of fuel prices considering that by the time increased refinery capacity is available, demand will have grown even more. Many think that we have depleted half of all the oil reserves available and are thus at the peak in terms of available oil. Whether this is true, one thing is for certain, the days of easy oil are over with.
So strap in.
Life is no joke but funny things happen
jon
