This is from the Stratford Report. Usual disclaimers of educational purposes only.

Oil Price Relief Courtesy of Iraq? 10 December 1999

SUMMARY

On Dec. 10, U.S. Energy Secretary Bill Richardson announced that the Clinton administration may finally be prepared to act in the face of rising world oil prices. His surprise announcement alone knocked prices down briefly by 2 percent. On the face of it, the United States has a variety of options for lowering prices  but all have decidedly limited possibilities. The Clinton administrations unease may open the door to tapping the reserves of two usually unsavory potential partners with enough oil to dampen prices: Iran or even more ironically, Iraq.

ANALYSIS

After a speech on Dec. 10, U.S. Energy Secretary Bill Richardson suddenly announced that the Clinton administration is openly concerned about the rise of world oil prices. Prices have been drifting into what I see as dangerously higher levels, Richardson said. He added, I am prepared to recommend whatever steps are necessary to protect the American consumer and the American economywere almost in a danger range and I want to send a message.

Richardson said he might recommend that the White House consider options to lower oil prices to safeguard American national security. Richardsons statement alone knocked oil prices down by 2 percent, but without significant action this reduction will not last. The question remains as to what the United States can do unilaterally to lower oil prices. Though it can try many approaches, Washingtons most pragmatic course of action is to tap the excess capacity of Iran  or more likely Iraq.

On its own, the United States faces a variety of limited options. Washington could try to dampen demand  by ratifying the pending Kyoto Protocols, mandating the use of fuel cell technologies, or approving a sharp gas tax increase. But these measures would require significant time to garner congressional and public support, and to implement. Moreover, raising fuel prices in order to drive down fuel prices would be counterproductive. With the election season well underway, such action would likely doom Vice President Al Gores bid for the White House.

The United States is not only unwilling to lessen demand but it is also unable, by itself, to increase the short-term supply of oil. There are large untapped reserves throughout the United States but these wells cannot be tapped profitably unless global oil prices rise significantly above current levels. Nor could they be exploited quickly. And such a move would require the cooperation of U.S. oil producers, who are also enjoying high oil prices.

The easiest approach would be to release U.S. strategic reserves. But, according to the U.S. Energy Information Agency, strategic reserves would only produce at a rate of 3.9 million barrels per day for 90 days. This would do little to offset a daily global demand of about 74 million barrels. It would unlikely be enough to bring about any long-term price stabilization even at the cost of slashing the emergency petroleum supply.

The United States will probably not find additional foreign oil sources. OPEC states seem unlikely to cater to an American desire for low prices, recovering from a year of lows. OPEC is also enjoying a bout of long-sought unity. Indonesia, Mexico and Norway seem content with the extra income which accompanies high oil prices, and with Western criticism building to a crescendo over events in Chechnya, Russia is unlikely to go to great pains to make Richardsons job any easier.

Washington may find its best options with the least savory partners: Iran and Iraq. Iran currently exports significantly below capacity. Due to recent European investments Iran is a half-step from again becoming a major producer, as well as a conduit for Central Asian oil. All that awaits is an end to U.S. sanctions. However, the re-entry of Iran onto the global energy market would torpedo U.S. geo-strategic plans for the Caucasus and Central Asia.

Given an array of bad choices, the United States might seriously consider lifting the sanctions on Iraq, whose oil reserves are second only to Saudi Arabias. Although Iraqs infrastructure has been damaged by years of sanctions, analysts predict that it could be up to 1990 production levels in six months. Of course, oil prices would likely drop in anticipation of the exports.

Such a revision of U.S. policy  likely spun as an extension of the currently inactive oil-for-food program -- would not only decrease oil prices, but would also have important side effects. One would be the reinstatement of Turkeys transit income from the Iraqi-Turkish pipeline, which has not ran at full capacity since the Gulf War. The same would be true for the Iraqi-Syrian pipeline. Washington could use the opportunity to entice Syria into a final settlement to the Middle East peace negotiations.

Unless the United States can crack open the current OPEC production restrictions, the only politically feasible option is to increase the amount of oil on the global market. Given this choice, the United States might be willing to open up Iraq in exchange for cheap oil and a chance to contain Iran, as well as gain the side benefits of assisting Turkey and potentially boosting Middle East peace. The irony is stunning. The U.S. fought a war with Iraq in order to ensure stable oil production. It might finally be willing to lift Iraqi sanctions for the same reason.

-- Taz (Tassi123@aol.com), December 11, 1999

Answers

Somebody remind me to get the woodburning engine info from FEMA n Monday....

-- Satanta (Stop@smellTheSmoke.com), December 11, 1999.

I have to say, I am wary of this supposed deal that has been struck with Iraq. The market moved off hard on the news that the deal had been extended. The issues regarding the inspectors were never resolved and the UN security council remains split over these issues negating the possibility of a consensus vote. Originally, the broader UN/Iraq issues were to be voted on today. Somewhat abruptly, the vote was put off til Monday. Saddy hasn't pumped shit yet and won't until at least Wed. My guess is that this gives him time to mull(ah) his decisions pending the outcome of the broader vote. This vote is split courtesy of our wonderful friends from Russia and China. Caveat Emptor. If Saddy is just jerking us around here, crude will fly back up like a bat out of hell. There are many reasons for Saddy to take this tack, our economy, Saudi favor, remediation of Iraq systems, the list goes on. I may be all wet on this, but I've been there before. I don't trust Iraq as far as I could throw a scud.

The article above shows just how desparate this situation is. Crude is a big part of our economy, and the stuff is really taking a toll on the Admins spin control relative to "the new non-inflationary" economy.

For educational and research purps: Saturday December 11, 5:44 am Eastern Time FOCUS-Iraq welcomes oil deal, signs contracts (Recasts with Iraq reaction to U.N. vote)

BAGHDAD, Dec 11 (Reuters) - Iraq welcomed on Saturday a six-month extension of its ``oil-for-food'' deal with the United Nations and signed the first contracts with foreign companies to sell crude oil under the humanitarian scheme.

``There is no problem with the new six-month extension and and we will deal with it routinely,'' Iraq's Deputy Foreign Minister Nizar Hamdoon told Reuters.

The U.N. Security Council on Friday unanimously approved a six-month extension of the programme, which allows Baghdad to sell $5.26 billion worth of oil to buy food, medicine and other relief supplies for the Iraqi people who are subject to U.N. trade sanctions.

Hamdoon said he expected Iraq to resume its oil exports ``shortly'' under the new phase seven of the programme.

An official source at the Iraqi Oil Ministry told Reuters oil exports could resume on Wednesday.

``Iraq has began signing contracts to sell oil under the new phase seven of the oil-for-food and medicine agreement,'' said the source, who asked not to be named.

``We expect that we will begin loading operations of the oil tankers on December 15.''

The source declined to name the companies that had signed contracts.

Iraq halted its oil exports on November 24 in protest at two extensions of the programme that prolonged it by just two weeks, then one week. Baghdad insisted it needed a six-month rollover to plan properly.

Iraq is allowed to export oil under the programme via the Turkish port of Ceyhan and Iraq's Mina al-Bakr terminal in the south of the country.

The United States last month insisted on the short extensions to pressure Security Council members into adopting a broader, comprehensive resolution that would make some of the oil-for-food provisions obsolete.

British Ambassador Jeremy Greenstock, the current council president, said at the United Nations he had scheduled a Monday vote on the resolution, which could lead to a suspension of sanctions imposed after Iraq's 1990 invasion of Kuwait.

It would set up a new arms control commission aimed at returning weapons inspectors to Baghdad after a year's hiatus.

-- Gordon (g_gecko_69@hotmail.com), December 11, 1999.

Uncle Sam blowing up Saddam (primarily his innocent citizens actually) when it is convenient and becoming buddy buddy with him when that is more convenient......

Say it ain't so..........

Funny how big brothers morals only come into play when its' own security is threatened.....they don't seem to be so self-righteous protecting the innocent minorities in places such as Africa or against nations such as Russia and China that might actually fight back.......

Can anyone spell B-U-L-L-Y.

-- Craig (craig@ccinet.ab.ca), December 11, 1999.

Craig, we have the authority to do anything we want, we have B-2s, Cruise Missiles, Nuclear Weapons, Most of the Food, Most of the Money, and by golly we are the US of A.

We withheld the the pursuit into Iraq because it was in the strategic interests of the country to have a despot like Sadam licking his wounds but in power than risk the instability of having a second muslim extremist country in charge of That Much Oil. It was also in the strategic interest to have Iran and Iraq slaughter each other for so many years. The world has always worked like that, this country has always worked like that. Having a group hug is not going to change the fact the world frequently sucks.

But have a nice day, anyway.

-- Squid (ItsDark@down.here), December 11, 1999.

STRATFOR are a CIA front, and, more than that, are pretty useless analysts.

They have NEVER factored y2k into ANY of their reports on ANYTHING...

Why?

I wrote to them acouple of times and got no reply.

With embedded chips in all aspects of the Petroleum industry it's a no-brainer that production will be affected, but oh nooooooooooo, Stratfor can't see the potential impacts.

Disinformation morons.

-- Andy (2000EOD@prodigy.net), December 12, 1999.

Good posts.

Andy, I thought the same thing about STRATFOR. I've thought it very strange.

-- Gregg (g.abbott@starting-point.com), December 12, 1999.