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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Tomas who wrote (13892)	10/12/2002 12:30:17 AM
From: Tomas	Respond to of 206363

Terrorism fails to choke oil supply Upstream, October 11 By Vahe Petrossian Imagine an oil tanker being sunk by terrorists in the Strait of Hor-muz. The narrow waterway could be blocked for good, choking the West’s energy lifeline and bringing the world economy to a halt. This nightmare scenario used to be conjured up frequently by the late Shah of Iran in the 1970s to underline the importance of his role in ensuring free passage through the strait — which is roughly 45 kilometres wide at its narrowest point between Iran and Oman and offers a limited number of navigable tankers channels. Since those days, much worse things than the Shah could have ever imagined have come to pass. They include war between his country and neighbouring Iraq — a war which saw the destruction of oil fields and export terminals, as well as attacks on Kuwait’s facilities and tankers. Iranian tankers were also hit near the Strait of Hormuz. With the Iran-Iraq war hardly over, Kuwait’s oil fields were torched by retreating Iraqi troops in 1991, and, for a while, there was a complete halt in Kuwaiti and Iraqi exports. These massive disruptions in the production and export facilities of some of Opec’s leading producers not only failed to paralyse markets, but seemed to have a perverse effect on prices. Through much of the 1980s and 1990s, oil prices tended toward historic lows in both absolute and relative terms, until Opec managed to establish greater control over prices in the late 1990s. This week’s incident involving a suspected terrorist attack against the French-owned tanker Limburg off Yemen followed a familiar pattern. A mild panic sent oil prices up by 5% to above $30 for about a day. The next day, markets were back to normal and prices dipped below the previous week’s level. If the French tanker attack was a terrorist action, there is every reason for concern and for contingency planning. If history offers any lessons, however, it is that the world’s energy lifeline is not as vulnerable as once feared. The Strait of Hormuz, through which most of Opec’s exports flow, seems immune to closure. The tanker lanes are wide enough for even a dozen supertankers to be sunk without blocking the strait. In the event, Iran — named as part of the "Axis of Evil" by US President George W. Bush last year — depends completely on Gulf waters for its crude exports and can be counted on to ensure the smooth flow of oil from the region. Even if the Persian Gulf were to become off limits, leading Opec exporter Saudi Arabia has an alternative route — the Yanbu terminal in the Red Sea can handle nearly half of its present exports. If anti-US terrorists had been hoping to damage the world economy by opening a campaign against oil tankers, then the results so far will have given them cause to reconsider. The tactic does not appear to have been very productive, and even the most dedicated al-Qaeda follower would hesitate before sacrificing his life for a $1 per barrel blip on world markets. The greatest threat to the energy market would not appear to come from terrorists, but from the aftermath of a US military attack on Iraq. It is salutary to remember how markets reacted to the war against Iraq in 1991. Prices shot up to over $40 per barrel in anticipation of the war, plunging to some of their lowest levels once the fighting started. This time, there will be far graver consequences — politically and economically — if there is a new war. In 1991, the equation was simple and there was consensus on forcing Iraq to end its occupation of Kuwait. This time, military defeat of Iraq would just be the beginning of the story. Saddam Hussein’s departure could create anarchy in Iraq, threatening the stability of neighbouring countries; and the recent loosening of ties between the US and long-time ally Saudi Arabia could be accelerated, encouraging traditionalist forces in the kingdom and transforming the country’s role as a linchpin of Western energy policy. Any war in the region raises many questions over the flow of oil from Gulf producers and the prices that consumers may have to pay — even if the consequences are not felt in the shorter term.