- WASHINGTON (Reuters) -- Crude
oil prices could triple to $80 a barrel during the first quarter of next
year and strangle the world economy under the worst case scenario of a
U.S. attack Iraq, energy experts said today.
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- Crude prices are likely to spike that high if Iraq destroys
its oil facilities while retreating from U.S. forces, Iraq uses weapons
of mass destruction, and key oil facilities in next door Saudi Arabia and
Kuwait are damaged by Iraqi missiles.
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- That is the conclusion of energy experts who met at the
Center for Strategic and International Studies think tank (CSIS) to discuss
the impact of a U.S. war against Iraq on the oil market.
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- Such a huge jump in oil prices would devastate the global
economy, which is already struggling.
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- "All you need is $40 oil to bring the economy to
a complete standstill. If we have $80 oil we're going to be in the hole,"
said Adam Sieminski, global oil strategist at Deutsche Bank.
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- Consumers would be hit with skyrocketing gasoline prices
at the pump. The price crude oil accounts for about 44 percent of cost
for a gallon of gasoline.
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- Commercial jet fuel prices might not take as bad a hit,
because the U.S. military has been planning for an attack on Iraq and has
stockpiled fuel for its fighter aircraft, the experts said.
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- Under the worst case war scenario, after oil hit $80
a barrel in the first quarter prices would eventually decline to $60 in
second quarter, and then fall to $50 in the third and fourth quarters,
according to CSIS analysis.
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- Currently, a barrel of crude trades for about $26 at
the New York Mercantile Exchange.
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- The Bush administration could help calm the energy markets
by announcing ahead of an attack on Iraq that it planned to release oil
from the U.S. Strategic Petroleum Reserve.
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- The reserve, which was created by Congress in the mid
1970s after the Arab oil embargo, currently holds 589 million barrels of
oil in deep underground salt caverns located at four sites in Texas and
Louisiana.
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- "You have to be prepared to make an early release
of the reserve," said Larry Goldstein, President of the Petroleum
Industry Research Foundation.
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- Goldstein said President George W. Bush would not have
to actually draw down the emergency oil stockpile, because just the prospect
of putting more crude in the market could stabilize prices.
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- "I think the simple announcement of our intent (to
use the reserve) would go a long way to calm the market ... we don't even
have to follow through," he said.
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- Sieminski said Bush could wait until the war had begun
to tap the reserve.
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- "My fellow Americans our troops are in Iraq and
by the way I'm releasing oil from the Strategic Petroleum Reserve,"
Sieminski said about what Bush could tell the public at the start of an
attack on Iraq.
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