Global price of crude oil had ever reached the highest level since 9 moths, after ISIS (Islamic State of Iraq and the Levant) capturing the northern of Iraq. If output of crude oil in Iraq is reduced by 1/3, global prices of crude oil will be increased by 40 USD per barrel, which may strike tender global economy catastrophically.
On the press conference, June 19, Obama, the President of the United States listed various reasons for restraining ISIS. One of the reasons was to ensure stability and safety on global energy market. For reasons of starting war, both Bush and Obama had always been diluting the factor of energy safety deliberately before. However, energy safety was pointed out clearly which meant that world needed crude oil from Iraq.
The reason can be seen from data. Iraq whose daily output is 3.3 million barrels is the seventh largest crude oil
producer in the world. Global price of crude oil rose as ISIS controlling the northern of Iraq in the early of June. On June 23, global price of crude oil was 115 USD per barrel which is the highest in the near 9 months. BP and ExxonMobil began to withdraw their staffs from Iraq for safety. An important oil refinery in the northern of Iraq had ever become battlefield once, which was destroyed and could not continue operating.
ISIS has approached to Baghdad. They may capture air port in Baghdad at any time. Facing with the situation, global oil market shows surprising calmness in fact. On one hand, the most important infrastructures and oil refineries is located at the southern of Iraq controlled by Shi'ites which is far from core battlefield. Oil-producing capacity and export capacity have not been decreased in substantiality because of conflict. On the other hand, crude oil reserves are relative abundant in global market. The U.S. the past largest energy importer develops shale gas, reducing crude oil import enormously. From 2010 to 2013, the increasing output of gas in the U.S. is almost equivalent to 98% of global net growth. And the U.S. may export gas in a short term. But buffering effect caused by transition of the role for energy supply and demand in the U.S. can be only maintained in a period of time. Once ISIS captures Baghdad, output of oil in southern must be affected.
Instability in Iraq will also bring long-term influence. Proved oil reserves in Iraq is located at the fifth position worldwide. There are a mount of oil underground waiting for exploration while efficiency of oil industry is always low because of long term autarchy, sanctions from 1990’s and chaos caused by war. Once oil industry is on the way, potential growth of output and export of oil in Iraq are amazing. In February, output of oil in Iraq had ever reached to 3.6 million barrels per day, the highest output since Saddam in power in 1979. Iraqi government cooperated with foreign capital energy corporations. The level of misering, development and refinery were highly improved in short time.
Nowadays, petroleum is still the most main fuel. The demands for oil will be increased with rising of global economy. IES estimates that global demands for crude oil will be increased by 1.4% in 2014. If new output cannot meet the demands, rising price will damage economy. IEA predicts that output of oil in Iraq will be increased to 6 million barrels per day in 2020. Iraqi has higher expectation, reaching to 9 million. The expectation needs sustaining foreign investment. However, ISIS is disturbing deployment. ISIS has disturbed deployment. IEA has already reduced output of oil in Iraq in the next year to five hundred thousand barrels per day.