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War in Iraq Could Cause Oil Prices to Double, says Analyst - 2003-01-16

A respected oil industry analyst in Washington says if there is a war in Iraq oil prices will continue to rise and could even double from their current two year highs. But, the analyst believes prices will quickly fall back once the situation in Iraq is resolved.

Robert Ebel, the energy and national security director at the Center for Strategic and International Studies, expects oil prices will average about $35 a barrel this year. That's considerably above current levels. Mr. Ebel, who formerly analyzed oil markets at the Central Intelligence Agency and in the private sector, says if it is very difficult to say what is going to happen in Iraq. However, he leans towards the view that there will be some kind of foreign intervention and change of government in Baghdad.

"We don't know what kind of Iraq we're going to have the morning after [Saddam is gone]," he said. "Is it going to be devastated, or is that benign scenario we've talked about or maybe even a no war scenarios that going to play out?"

But from conversations with Iraqi opposition leaders, Mr. Ebel is prepared to make some predictions about the Iraqi oil industry. That industry, he says, is in very bad condition and even now, before a war, requires millions of dollars in investment. Iraqi oil fields, pipelines, and refineries are badly neglected and the country is broke with a foreign debt of over $100 billion. Oil production, currently two million barrels a day, even in the best case scenario, could not reach more than 2.5 million barrels a day by 2005. However, longer-term, says Mr. Ebel, Iraq has great untapped oil reserves and its output could eventually reach six million barrels a day.

Mr. Ebel dismisses the assertion that U.S.-based multi-national oil companies will gain control of the oil fields in a post-Saddam Iraq. There is, says Mr. Ebel, a long tradition of nationalism in Iraq concerning the oil industry. A post-Saddam government, he believes, most likely would adhere to this tradition.

"If you were an Iraqi sitting across the table from a representative from a major oil company and you knew they were so anxious to get involved in Iraq because of the huge potential, and it is isn't just potential, we know the oil is there, as many fields have been discovered but not developed, they're literally ready to go, you're going to drive as hard a bargain as you can," he said

Mr. Ebel emphasizes that throughout the Middle East the oil multi-nationals no longer have ownership control but merely buy crude from national oil companies. He believes this pattern would probably prevail in a post-Saddam Iraq.