Can the U.S. fill the gap of potential oil losses from Iraq?

By Marita Noon, Special for USDR

While we weren’t paying attention, post-war Iraq grew into a major force in the global oil market. Reaching a 30-year high, its production and exports have climbed steadily since 2011—making Iraq the second largest producer in OPEC, the seventh globally.

Iraq has filled in the production gaps caused by violence in Libya and sanctions in Iran. Crude oil prices have been stable. The Wall Street Journal (WSJ) states: “crude volatility recently had ground down to multi-year lows.”
But that low volatility level was before rapid gains by extremist insurgents in northern Iraq put all that progress in jeopardy, raised gasoline prices, and sent “shudders through financial markets.” A barrel of oil is now trading at its highest level since September.
The sectarian fighting in Iraq had already caused a 4 percent increase in world oil prices which is expected to translate to a 5 to 10 cent a gallon bump in the price of regular unleaded gasoline.
Most of Iraq’s oil fields are in the south and are, so far, believed to not be at “immediate risk.” Yet, the New York Times (NYT) reports: “The collapse of Iraq would bring an international oil crisis. …It would mean crude oil would go up to $150 a barrel.” The Wall Street Journal affirms the impact of the mounting unrest which will have “radical implications for oil markets at a time of growing lost production worldwide due to intensifying disorder in a growing number of petroleum-producing counties.”
“But,” NYT continues, “oil prices have been rising modestly compared with what would be expected from a major crisis in the Middle East.” Why? According to the NYT, “growing oil production in the United States and Canada has helped cut American oil imports, helping to keep global supplies hardy.” The report states: “World oil supplies are relatively robust at the moment, which explains why oil price increases have not been significant. Global supplies are up a million barrels a day from a year ago, mostly because of North American production.”
Edward Morse, head of commodities research at Citigroup, States: “By itself, Iraq’s turmoil may have limited impact, but coinciding with Russia’s annexation of Crimea and Libya’s instability, it points to a systemic and seismic shift geopolitically.”
If Iraq’s production continues to be threatened, as it looks like it will, John Kingston global news director for industry tracker Platts Energy, asks the obvious question: “who is going to fill the gap?”
The obvious answer should be the United States—after all, North American production is credited with keeping prices relatively stable compared with what would normally be “expected from a major crisis in the Middle East.”
Unfortunately, President Obama turned a blind eye to the unrest in Iraq—despite the fact that militants attacked and crippled a key oil export pipeline in northern Iraq a few months ago. He chose to cling to “The world is less violent than it has ever been” narrative. As a result, he has failed to protect America’s economic security. He could have helped cut America’s dependence on Middle Eastern oil—about 300,000 barrels of Iraqi oil are used in the U.S. each day. Instead he has listened to his environmental base that opposes all fossil-fuel development and he has presided over a decline in production on federal lands.
While U.S. production has helped blunt the short-term impact of the Iraq conflict, a recent report from the Congressional Research Service (CRS) “quantifies the Obama administration’s hostility towards America’s oil and natural gas industry,” Chris Prandoni said recently in Forbes. Prandoni continues: “a fair way to judge the Obama administration’s stance towards oil and natural gas is to compare federal production to state and private land production. According to the CRS report, oil production on federal lands actually fell 6 percent between 2009 and 2013. Over the same period of time, oil production increased by an astounding 61 percent on state and private lands.” The Daily Caller reports: “federal lands and waters hold about 43 percent of all domestic oil reserves and 72 percent of oil shale acreage.”
Putting oil-and-gas development on federal lands into a “free fall,” as the Daily Caller refers to the Obama policy, is just one way the White House has made America vulnerable to oil market instability. Blocking the Keystone pipeline is another. Had it been approved as originally expected more than five years ago, it could now be bringing additional resources to market and helping stabilize global supplies and filling the gap created by unrest in Iraq, Libya, Russia, Nigeria, etc.
It is time to realize that the altruistic-sounding claims of environmental lobbyists do not have America’s interests at heart.
For the U.S., the silver lining of the black cloud over Iraq could be a renewed public awareness of the importance of developing our own energy resources. With his phone and his pen, Obama could increase access and expedite drilling on federal lands. He could approve the Keystone pipeline. He could come out with a strong statement in favor of fracking and the benefits it provides. However that would require standing up to his environmental allies like billionaire Tom Steyer—something he’s not likely to do.
But Congress should hear from us. And we can vote in November. A Republican controlled Senate, along with a Republican House, can make some changes that Obama is unwilling to consider: economic security, energy production, job creation, and lower costs.

Marita Noon is the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and the environment through public events, speaking engagements, and media, the organizations’ combined efforts have made Marita “America’s voice for energy.”
All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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