Iraq’s Flood of ‘Cheap Oil’ Could Rock World Markets

From The Washington Times

By Patrice Hill

The U.S. is not the only nation experiencing a renaissance in oil production.

Sidelined for two decades by war, sanctions and political instability, Iraq passed a critical milestone last year by producing 3 million barrels a day of crude oil for the first time since 1990, before the Persian Gulf War, reaching 3.4 million barrels a day by December. Given its access to vast reserves at low costs, Baghdad is poised to play a pivotal role in determining whether the world’s growing thirst for oil drives up fuel prices to debilitating levels in coming years.

Iraq has a potential as a game-changer” in the volatile global oil market, said Maria van der Hoeven, executive director of the Paris-based International Energy Agency (IEA). Already, she noted, Iraq has moved up to be the world’s third-largest oil exporter and is now on a path to be much more, becoming a “strategic source of world oil supply” in the years ahead. Iraq even has hopes of supplanting Saudi Arabia as the globe’s biggest oil producer.

Iraq is perhaps the only country left in the world that has huge stores of what insiders call “cheap oil” — untapped reserves that can be extracted through relatively inexpensive, traditional drilling techniques rather than having to employ costly technologies such as hydraulic fracturing and deep-sea exploration — as in the U.S. — to tap reserves of oil found offshore or in deep underground shale formations.

The boon of cheap oil is the ironic result of Iraq’s many years outside the economic mainstream, when ongoing wars and an international oil embargo enforced by the United Nations ensured that the nation’s oil treasures were left mostly untouched in the ground.

The gusher of oil starting to flow from Iraqi wells couldn’t come at a better time. Demand for oil is escalating in quickly emerging markets such as China and India, where the use of cars is surging, and other major oil exporters such as Russia and Saudi Arabia appear to be reaching limits of their abilities to ratchet up production in major ways.

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