Scorched Iraqi oil fields won’t affect prices
Despite repeated warning from President Bush and other military officials to Iraqi troops not to destroy Iraqi oil wells and production facilities, seven oil wells were set ablaze by retreating Iraqi soldiers Friday.
Initially, media reports stated that there were up to 30 oil wells that had been set on fire, but in a news conference in Qatar Saturday, United States Brig. Gen. Vince Brooks said only seven oilfields in southern Iraq were confirmed sabotaged.
Traders on the U.S. crude oil market were first worried about a disruption of oil supply when the news of burning oilfields was announced Friday.
But optimism resumed quickly when U.S. Energy Secretary Spencer Abraham reassured that U.S. oil supplies were stable.
“There shouldn’t be any immediate impact,” visiting Business School Prof. Steve Percy said. “Unless the oil wells are set ablaze in a major kind of way that the market perceives that those wells won’t be able to be fixed in the short term, there will be some upward pressure on prices.”
Before Operation Iraqi Freedom went into action, oil and gasoline prices surged to decade highs.
But since the war started, oil prices have plunged more than 30 percent – from nearly $38 on the New York Mercantile Exchange on March 12 to $26.91 on Friday – due to the anticipation of a quick victory over Iraq.
“The market is saying we believe that once we’re beyond this turmoil, this means more oil – not less,” Percy, former CEO of BP America, said.
When the current Iraqi regime is defeated, Percy said, democracy will be brought into the country and Iraqi oil production will increase.
“Iraq could be potentially … a larger producer of oil than Saudi Arabia,” Percy added.
He said a short war with Iraq will not only bring down oil prices, but will benefit the economy as well.
“A lot of companies were not investing because of the uncertainty,” Percy said.
“Once the uncertainty is removed, then people have a clearer view of what the picture looks like and will cause them to have more optimism.”