Q&A: war on Iraq and oil


The US Energy Secretary yesterday urged Britain and its allies to 


the Americans in building up its oil reserves. Richard Colwill, Online

Business Editor, explains the reasons behind the request.

Why the concern over oil?

Spencer Abraham, the US Energy Secretary, yesterday insisted that

stockpiling oil for emergencies was simply a matter of "overall energy

security". He confirmed reports that America has begun to build up its

strategic petroleum reserves  held in caverns beneath the Gulf of 


and suggested that America's allies ought to be doing the same.

Behind his words is a resolve to avoid increasing oil prices  which 


be precipitated by military action against Iraq. A jump in oil prices 


have a serious effect on the global economy and in particular 


which is still struggling to bounce back from its technical recession 


last year.

Will Britain follow the advice and build up its reserves?

Britain is in a different situation from America. Its access to the 


Sea oil fields means that it remains the only significant energy 


in the European Union. America is still heavily reliant on oil from the

Gulf. This explains why the Bush Administration is so keen to drill for

oil in protected wildlife reserves in Alaska.

Recently, there has been a steady decline in oil production from the 


Sea, but the discovery of new reserves at the Buzzard field in January

could yield a further billion barrels - the biggest find in the North 


in 25 years.

Britain already has to comply with a European Union directive to have

enough oil stockpiled to last for 90 days. The Department of Trade and

Industry (DTI) says it has no plans to increase oil reserves.

Would a war against Iraq be bad for oil prices?

The 1991 Gulf War saw a big leap in oil prices that eventually forced

George Bush Sr out of office. So the view that oil prices could rise

putting pressure on an already weak global economy  has a historical


A recent study by Credit Suisse First Boston, the investment bank,

challenges that view. It argues the oil markets have already discounted 


war, ie, the price of oil already reflects that possibility. Also, the

subdued world economy means that demand for oil is weak, so the effect 


a war on oil prices is likely to be short lived. The report says that 


America topples President Saddam Hussein, it would act as a boost to

business and investor confidence as the threat of terrorist action in 


region and elsewhere would diminish.

However, it is worth noting that this analysis is littered with 

caveats. A

prolonged conflict, or an outcome that left Saddam in power, as in 


could have a devastating effect on oil prices and broader markets


A spokesman for BP, the oil company, said today that it does not 


on future oil prices, but that it doesn't necessarily follow that a 


in oil price translates into more expensive petrol at the garage

forecourt. Since the first quarter of this year, when the price rose to

around 74.9p a litre, petrol prices have remained steady.

If Saddam is deposed, would the oil markets benefit?

The potential benefits for America and its allies could be huge. 


and America have, among other Western allies, been attempting one way 


another to secure access to Iraqi oil for most of the last century.

Iraq has oil reserves of about 112 billion barrels, second only to 


Arabia, which has 265 billion barrels. The economic sanctions in place

since the end of the Gulf War mean that Iraq can sell only a fraction 


this on the open market and is compelled to use the proceeds to buy

necessities like food and medical equipment.

Should Saddam be deposed and replaced by a more West-friendly leader, 


would remove the last obstacle to America's strategic aim of reducing 


long-term dependence on oil from Saudi Arabia.


Back To Islam Awareness Homepage

Latest News about Islam and Muslims

Contact IslamAwareness@gmail.com for further information