From: Robert J. Bradbury (bradbury@aeiveos.com)
Date: Tue Jan 28 2003 - 18:52:45 MST
On Tue, 28 Jan 2003, Mike Lorrey wrote:
> --- Lee Corbin <lcorbin@tsoft.com> wrote:
> > Mike Lorrey beautifully explains
> >
> > > Oil prices in a free Iraq world would be around $10/bbl.
> > > They are currently around $30/bbl, partly due to the
> > > restriction on Iraqi oil exports, partly on the Venezuelan
> > > civil conflict (which can also be traced to left wing
> > > organizations), and partly on global uncertainty over
> > > future US actions in Iraq.
Mike/Lee I simply cannot accept this premise (sorry).
You have to assume that (a) the U.S. (or Europe) would
act to pump-up-the volume with respect to Iraqi oil
production (and there is no useful knowledge with
respect to the degree they could do that given a
decade of decay in the production capabilities) and
that the (b) the Saudis (or other OPEC or even non-OPEC
members) would not act in a way to offset the production
increase that Iraq *might* be able to achieve.
The price of oil is subject to a complex "present value
analysis" of both the countries producing it and the
consumers. It comes down to a question of "do I gain
more by pumping the oil or leaving it in the ground?".
Yes, there are disruptions, e.g. Venezuela or perhaps
pipelines being blown up (or not built due to political
problems), etc. But you are living in a fantasy world
if you think most oil producing nations are going to
pump oil at $10/bbl). They *know* the supply will
eventually decline. They are also in primarily state
run companies that are not subject to the quarterly
dictates of Wall Street. So their focus is on "how
do I preserve my job?". And that is very dfferent
in each political situation.
So I would suggest that if you think every oil minister
will continue to do exactly what they are doing now if
Iraq bumps its production from say 2M to 4M BBL (these
are hypothetical numbers which one would need to verify)
then you are living in fantasy land.
Robert
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