Civil War in Iraq Set to Send Oil Prices Into Orbit?

[sabra]

http://www.resourceinvestor.com/pebble.asp?relid=17600

Civil War in Iraq Set to Send Oil Prices Into Orbit?

LONDON (ResourceInvestor.com) -- As Iraq seemingly teeters on the brink of civil war, it is prudent to examine the potential implications for the global economy of the country finally heading over the edge. As if the worsening assaults against the British and American forces of occupation weren’t bad enough, it now looks very much like inter-religious strife in Iraq may be heading towards crisis levels. As well as frustrating any hopes for Iraq’s return to relative normality, this has the potential to result in a region wide conflagration, the effects of which on the oil market could be tremendous.

Violence between Sunni and Shi’a Muslims in Iraq appears to be growing more intense every day, but a more dangerous possibility is that there will come a point at which Middle Eastern states that are predominantly populated by adherents to either of these two sects will feel compelled to intervene in Iraq and assist their fellow adherents there. The prime candidates for this course of action are Iran, on the side of the Shiites, and Saudi Arabia, on the side of the Sunnis.

Whilst any marked increase in the level of disorder in Iraq tends to filter through to some extent to the oil market, it could well be thrown into a febrile panic by the entry of other Middle Eastern states into a full blown civil war. The potential for supply disruption by the offensive actions of military and irregular forces in such a conflict is immense, especially if the theatre of engagement were, as is likely, to extend beyond the bounds of Iraq. Thus, the risk premium on every barrel of oil traded would go up.

Whether or not U.K. and U.S. forces can keep the situation in check is in a way irrelevant; fear will still be sown in the oil market by any indications that Iraq is even approaching the outbreak of real civil war, or that other Middle Eastern states may be ready to intervene.

[unblock]

1. gee, and that would be terrible news for domestic oil producers

they got their oil men in the white house so that we would invade iraq because it's a win-win-win situation for domestic oil producers. prices go sky-high no matter what, they get a chance to own iraqi oil, or at least control it.

the present scenario is playing out beautifully for them, a long stretched out period of fake u.s. control with prices at the barely tolerable level followed by civil war, with prices continuing to fluctuate between barely tolerable and intolerable.

meanwhile, america oil producers laugh all the way to the banks, which they will probably also be owning in due course.

[paparush]

2. And we thought that Exxon Mobil's profit were high after Katrina..

just wait till there's a full blown civil war in Iraq...gas prices hit (and stay) at $4.50/gal in the US. Bush**Co will blame it on "those evil doers who hate freedom" and joe-six pack america will shrug it off and not make connection between Bush** doctrine and violence and america being 'addicted to oil'.

[f-bush]

3. Of course! Shrub's been banking on this all along!

[Nickster]

4. Interesting, I see the Shi'a and Iran link, but the Saudi to Sunni link?

I would think that Wahabists would be against the Sunni?

[spag68]

5. oil prices

should not go up or down as iraq goes. not that much oil coming out of iraq anyway.