Turmoil in Iraq sees oil price jump to nine month high

Iraqi soldiers patrolling an oil refinery in Baiji, 180 kilometres north of Baghdad. Photo credit: Neurope.
By Anders Lorenzen
If more evidence of the security risks in a fossil fuel based global energy market is needed, then the recent turmoil and unrest in Iraq provides such evidence.

Insurgents in Iraq have taken two cities hostage and, as the second largest oil producer in the Organization of Petroleum Exporting Countries, it has seen the oil market panic, prompting the highest oil prices for nine months. Brent crude increased by 3 per cent to $113.27 (£66.71) per barrel, while US crude went up by more than 2 cent to hit $106.71, reaching the highest reading for both of the oil prices since September.

US President Barack Obama said on Friday last week that they would not rule out military intervention and experts are suggesting that if it develops to a full scale conflict, oil prices could remain high until the conflict is resolved or other large oil producing countries upped their production levels. Obama did not seemed worried that global Iraq oil production would fall, but if that were to happen he said that other countries must increase their production.

Today (18th of June) the Insurgents known as the terror organisation ISIS launched an attack on Irag’s largest oil refinery in Baiji and are said to be controlling 75% of the refinery.

The International Energy Agency (IEA) noted that the areas where unrest have broken out are two cities in the northern part of the country, areas where oil production has stalled since March. Iraq’s oil production currently rides on a 30 year high and most of the conflict-stricken country’s production has occurred in the south.

But analysts, commentators, politicians and investors will monitor the situation closely in the coming weeks. At the same time US conservatives could use this as a case to argue for more domestic oil production and an approval of the controversial Keystone XL pipeline that would make it possible for Canada to increase production of tar sands oil and thereby arguing that it would ease US’s reliance on imports from less-friendly countries. In Europe some governments, led by the UK could use the Iraq insurgents as a case for fracking to ease foreign imports, while environmentalists would argue that this is another example why we should move away from a fossil fuel based economy. 
Sub edited by Charlotte Paton

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