Bin Ladin's war against Iraq's oil
by Maurizio d'Orlando
Oil prices should be lower in 2005.

Milan (AsiaNews) – Eight billion dollars! That's how much rebel attacks on Iraq's oil industry have cost the country in lost export revenue since March 2003, Oil Minister Thamer Abbas Ghadban said yesterday. By comparison, the recent tsunami in the Indian Ocean cost twice as much.

"We want to tell the Iraqi people that there is an all-out war against the country's oil infrastructure," Ghadban told reporters as he toured the capital's Dura refinery, which came under mortar fire last week.

"Exports are now limited only to the south, there are no exports in the north," he added. Oil exports from southern terminals in Basra are averaging 1.8 million barrels per day. Before the war, oil production was 3 million barrels per day.

With 112 billion barrels, Iraq comes second only to Saudi Arabia in terms of proved reserves. With a modest investment in prospecting, Iraqi reserves could reach 250 billions.

Ghadban has warned that sabotage is to blame for fuel shortages that continue to plague the country despite its oil wealth, sometimes forcing people to wait a whole day to fill up their tanks.

The Dura refinery provides fuel for Baghdad's main power plant, which supplies electricity for most of the capital and outlying areas. Hence, now that power supply is affected, most sections of Baghdad plunge in darkness almost every night and residents have to rely on generators.

Over the weekend, Ghadban said, attacks continued. A pipeline transporting crude from the Kirkuk oilfields in northern Iraq to the Baiji refinery was bombed and a power plant in Mussayab, south of the capital, was attacked.

In an audio message, Osama bin Ladin urged his followers to further destabilise the oil industry by attacking Iraqi installations as well as those in the Persian Gulf.

In the last 20 years, OPEC has lost means to fix oil prices because it no longer has adequate reserve capacity. At one point, OPEC's reserve capacity was 15 million barrels per day; now, it is just 2.

This explains bin Ladin's strategy as well markets' jitters since there is no other source that might replace Iraqi oil should production come to a halt.

According to a major oil consulting firm, Wood Mackenzie of Edinburgh, things might get better in the second half of 2005 when new wells will come on line and OPEC's reserve capacity rise to 3 million barrels per day. This means that, short of any other major political upheaval, oil prices should be less volatile in 2005.

A study by the International Monetary Fund (IMF) and the International Energy Agency (IEA), show that high oil prices in 2004 have cut growth in OECD countries by 0.4 per cent.

IEA chief economist Faith Birol said in an interview with Reuters news agency that oil price hikes had a worse impact on developing countries. In India, it cost 1 per cent in economic growth; in Africa, 1.6 per cent.