Tuesday, August 15, 2006
Oil Prices Without the Iraq War
What would happen to oil prices if the iraq war ended today? They'd go down obviously... but by how much?
A general concensus amoungst oil analysts is that there is a risk premium on oil of about $8US/barrel. This translates to about $0.24US a gallon at the pumps ($10 give about 0.30 at the pump) or $0.07CDN/Litre here.
On top of the risk premium is the actual shortage of oil from Iraq. Iraq's oil production has collapsed because of insurgent attacks on the oil infrastucture. This represents a loss of about 2.3-2.5 million barrels per day out of a world wide production of 66.7 million barrels per day. This translates to about $10-15US a barrel in extra cost do to low supply. The end of the Iraq war would put the production back on line and sink the price of oil. In addition the added supply of oil would decrease the risk premium associated with oil, but would probably not eliminate it.
I would expect a price drop of $15-20US/barrel giving a reduction of $0.45-60US/gallon or $0.15-0.20CDN/Litre.
Jax
A general concensus amoungst oil analysts is that there is a risk premium on oil of about $8US/barrel. This translates to about $0.24US a gallon at the pumps ($10 give about 0.30 at the pump) or $0.07CDN/Litre here.
On top of the risk premium is the actual shortage of oil from Iraq. Iraq's oil production has collapsed because of insurgent attacks on the oil infrastucture. This represents a loss of about 2.3-2.5 million barrels per day out of a world wide production of 66.7 million barrels per day. This translates to about $10-15US a barrel in extra cost do to low supply. The end of the Iraq war would put the production back on line and sink the price of oil. In addition the added supply of oil would decrease the risk premium associated with oil, but would probably not eliminate it.
I would expect a price drop of $15-20US/barrel giving a reduction of $0.45-60US/gallon or $0.15-0.20CDN/Litre.
Jax
