One thing we have learnt this week- Iraqi oil

Oil and particularly Iraqi oil have been in the news this week. Of course first and foremost what is happening in Iraq is a humanitarian crisis.  Up to half a million Iraqis have fled the fighting, although there were reports of people beginning to go back to Isis controlled areas.  Of course they may not like what awaits them.  People who live under strict Islamic law tend to resent it pretty quickly.

We mentioned the Arab Spring in our book.   We wrote (and it seems very apt to say so now);

The whole “Arab Spring” has been totally unpredictable so far but one possible scenario is that the civil war in Syria spreads to its neighbours (Lebanon and Iraq) and then beyond and becomes a general conflict between Shia and Sunni.

We went on to write;

Whilst Shias are a minority overall in the Middle East they are very widely dispersed. In Iraq they make up a majority and there are large populations in the Gulf States and
Saudi Arabia. This scenario whilst looking relatively unlikely would lead to very major fossil fuel supply disruptions.

This no longer looks so unlikely.

If the invasion in 2003 was about oil it has been modestly successful.  The graph shows production as far back as the BP Statistical Review of World Energy allows.

iraqi oil productionThe IEA world energy outlook 2012 makes it plain that we are relying on Iraqi oil production going forward.

Without this supply growth from Iraq, oil markets would be set for difficult times, characterised by prices that are almost $15/barrel higher than the level in the New Policies Scenario by 2035.

Disruption to the Iraqi oil supply seems certain although it has had little impact on the price of oil so far.   But OPEC may have to increase production to make up for loss of Iraqi oil and the lack of oil coming out of Libya.

The whole situation is a huge mess and we have reached the stage where there probably is no solution (in human terms) and Isis are definitely waging a sectarian war against Shia who they regard as infidels. A link to some more background on the situation is in this previous post I wrote.  Here are some suggestions on what we should or not do.

  • The current shape of the middle east is based on the Anglo-French Sykes-Picot line drawn up in 1916.  Whilst the lines on the map took no account of the religious or demographic differences it still seems to me better for countries to hold together.  There is almost always trouble when they split up.  The demographic/religious composition is likely to be more complex than 1916 anyway.
  • This means that the Nouri al-Maliki government has to go and be replaced with a government with Sunni’s in.  Bombing Isis, whilst tempting, will mean we have taken sides unless this happens first. Even then I’m very wary about he idea.
  • I don’t think the situation has been entirely caused by the Anglo-US invasion.  Its impossible to say for sure but it seems unlikely that Saddam’s regime would have escaped the Arab Spring (there were regular rebellions against his rule).  The Iraqis have also had enough time and freedom to make their own mistakes (which they have).  This has more to do with Syria than Iraq.
  • We need to stop interfering in this region (because of oil) and largely leave the governments alone.
  • We do however need to stop this becoming a war between Sunni’s/Shias, and I say this as a Christian! The two groups exist throughout the middle east and Asia and this could be a major humanitarian disaster with disruption not just to Iraqi oil.  Its very difficult to see negotiations with a group as extreme and unpleasant as Isis.  There is a valid argument that Saudi Arabia and Iran are fighting a proxy war in Syria and now Iraq.
  • We need to get off oil ASAP, it causes no end of trouble, environmental and social.
  • Create good relations with Iran and reach a nuclear deal. We need peace, peace, peace.  Pray for it.

Neil

PS. There are enough keywords here for the NSA to find this post interesting, if you have read the text guys you are going to be very disappointed.  However, can I suggest you buy a copy of our book you might actually learn something….!

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