Oil prices in 2008

Iraq is producing 2.3 million barrels of oil a day, up from 1.9 million at the outbreak of war in 2003 and substantially higher than January this year, when it dipped to a low of 1.7 million barrels. Although a trillion or so dollars was spent and more trillions will be spent, there seems the distinct possibility that there finally be some economic benefits to offset the costs.

Continuing success in stabilizing Iraq could allow for 3 million barrels of oil per day from Iraq in 2008 and 3.5 million barrels per day by the end of 2009.

Iraq then hopes to boost output to six million bpd 10 years from now, Iraq Oil Minister Hussein Shahristani said. He said that to reach the targets, Iraq needed to improve its export infrastructure by building new terminals in the Gulf as well as new pipelines to neighbouring countries, including to the east, to Iran.

Some of the new supply will come from Saudi Arabia, which is opening up another oil field. There are a number of big projects coming onstream in the US Gulf of Mexico, Brazil, Russia, and Kazakhstan.

This year, oil production was about 85 million barrels per day, barely enough to satisfy demand of about 85.7 million barrels per day. “Next year, we’re probably closer to supplies of 87 million or 88 million barrels per day,” Kevin Lindemer, an energy analyst at Global Insight in Lexington, Mass, estimates

Energy supplies will be further augmented by an increase in biofuels. In 2007, EIA estimates, ethanol has been equal to 4.3 percent of the total gasoline pool. In 2008, there is expected to be 9 billion gallons of biofuels, up from 6 [billion] to 7 billion gallons right now.

In the past, US gasoline prices have climbed in the spring because of shortages in refining capacity. But next year, some new, large refineries will come onstream overseas, and some of their product will be shipped to the US. A new refinery in Saudi Arabia will produce more than 1 million barrels of gasoline per day, and a new refinery in India will produce 600,000 barrels per day. “Most of the new production is export-targeted, mainly to the US and Europe,” Mueller says.

Energy analysts warn that oil prices can be greatly affected by what happens to the US economy. In 1998, for example, the US slumped and the price of oil fell by 50 percent, recalls Mueller.

If the price of oil cools, the Chinese government might become a major buyer to fill its strategic petroleum reserves (SPR), which are under construction. Therefore, even if prices ease the Chinese strategic demand will support the price of oil.

From the longwarjoural, Iraq security forces surge.

A discussion about what if the Iraq War is “won” by the United States in 2008