Oil has gone straight up since it was announced that Senator Lieberman was
VP Gore's chosen running mate as his own VP.
"Again, as previously stated, this is a disaster for the Democrats as there
will be incredible pressure on the Saudis from Arab conservative hard liners
to tighten up on the pumps so that the price of oil rises high enough to
pain the American electorate enough to keep the Gore/Lieberman ticket from
retaining the White House. If they do not cut back on oil production, when
they have the obvious power to do so, the Saudis will be branded by some
Arab nations as Moslem traitors forever. It could topple the Fahd regime. "
US Govt Seen Ready For Potential Iraq Oil Supply Halt
DJN: =DJ US Govt Seen Ready For Potential Iraq Oil Supply Halt
By Campion Walsh
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The U.S. is ready to release crude oil from its
strategic petroleum reserve, or SPR, if Iraq disrupts world oil markets this
winter, according to government officials and industry analysts.
Market analysts say odds of a disruption to Iraq oil exports will rise
toward the end of the year as U.S. voters elect a new president and the
United Nations Security Council reviews international sanctions against
Iraq.
"We're always prepared in terms of contingencies for something like that,"
said a senior Clinton administration official familiar with Middle East
policy. "Plans would likely include an SPR oil release to make up for lost
exports from Iraq."
With a current inventory of 570 million barrels, the SPR can maintain
withdrawals of up to 4.1 million barrels a day for 90 days, according to the
Department of Energy. After that, draw-down capacity would decline as
caverns are emptied. At maximum withdrawal rates the current inventory would
last about seven months.
Iraq's production of 2.9 million barrels a day is slightly less than 4% of
the world total. And its role as the second-largest exporter in the
Organization of Petroleum Exporting Countries and political volatility
surrounding the country make it a key variable balancing global supply and
demand.
OPEC May Not Be Able To Make Up For Iraq
Analysts say Iraq is the most likely international flash point to trigger
release of SPR crude.
"A lot of people think the linchpin for the world oil market is Saudi
Arabia, but the fact is that Iraq is the biggest threat to international oil
supplies," says industry analyst Fadel Gheit of investment bank Fahnestock &
Co.
The rest of OPEC might be slow to increase production to compensate for an
Iraqi disruption because it wouldn't know how long the disruption would
last, he says. OPEC is also producing much closer to capacity now than
before the Gulf War, and it may not have enough capacity to make up for Iraq
as it did from 1990 to 1996.
OPEC's excess capacity is mostly in low-quality crude oil that wouldn't meet
market demand for Iraqi grades, according to oil-market economist Philip
Verleger of Brattle Group. "Saudi Arabia doesn't have the right kind of
spare capacity," Verleger says. "It's too sour (sulfuric), too heavy."
Saddam may want to thumb his nose at whichever party wins the November 7
U.S. presidential election, according to oil analyst Adam Sieminski of
investment bank BT Alex Brown.
If Republicans George W. Bush and Dick Cheney win, Saddam could see a chance
to spite the son of the president who ousted him from Kuwait and the defense
secretary who helped plan that rout. If Democrats Al Gore and Joseph
Lieberman win, the Iraqi leader may see an opportunity to protest the vice
presidency of an Orthodox Jew at a crucial juncture in Arab-Israeli talks.
Both the Republican and Democratic tickets want Saddam removed from power.
Iraq's animosity towards Israel could provide yet another flash point this
year, according to Gheit of Fahnestock & Co.
"Clinton has appeared to sell out Yasser Arafat, and it's not sitting well
with anyone in the Middle East," Gheit said of last month's Camp David peace
talks. Saddam could use his influence on the oil markets to protest
Washington's handling of the talks, especially if the U.S. proceeds with
plans to move its embassy in Israel to Jerusalem from Tel Aviv, Gheit says.
UN Diplomats Play Down Risk Of Disruption
The U.N. Security Council is due to review in December the Iraqi
oil-for-food program, which allows Iraq to export oil under U.N. monitoring
in exchange for humanitarian aid. The council is deeply divided about the
future of the program, and Sieminski says its pending review increases the
risk of supply disruption.
Iraq halted oil exports in December 1997 and November 1999 amid
disagreements with the Security Council on administration of the
oil-for-food program. U.N. diplomats say the program will likely be extended
another six months after the current six-month phase ends December 5. A
Western diplomat at the U.N. says a politically motivated disruption by Iraq
is unlikely. "The rest of the U.N. and the world would say, 'you're killing
you own people'," by cutting off a crucial humanitarian lifeline.
But economist Verleger says a disruption in Iraqi exports later this year
can't be ruled out, and the U.S. should be prepared with preemptive release
of crude oil from the SPR through swaps. Energy Secretary Bill Richardson
has resisted calls for an SPR release, saying the reserve should be
preserved for international supply emergencies.
The only time it has been tapped to counter such an emergency was in January
1991 after Iraq's invasion of Kuwait.
-By Campion Walsh, Dow Jones Newswires; 1-202-862-9291;
campion.walsh@dowjones.com
(Masood Farivar contributed to this story.) |
