U.S. President Barack Obama announced that nearly all American soldiers will return early from Iraq before the end of this year. Most experts agree that this decision will inevitably affect oil prices. Yet, they have diametrically opposing views on whether the price of “black gold” will rise or fall to 20 dollars per barrel.
At the end of his presidency, in December of last year, Bush managed to put pressure on the Iraqi leaders who reluctantly approved a security agreement for the deployment of foreign troops in the Iraqi territory. The document allowed American soldiers to legitimately remain on Iraqi soil until 2011.
But Obama, who in almost every pre-election speech promised that he would end the war in Iraq (at least for the U.S.) as soon as possible, clearly had other orders ready for the Pentagon generals. Why is Obama in a hurry? Obviously it’s not only because of the fact that for nearly every additional day that the Pentagon spends on providing (still very elusive) security in Iraq, there are new wounded and dead American soldiers. The rapid withdrawal of troops, no doubt, will allow Washington to save billions of dollars that the U.S. President needs to rescue the American economy, especially since this will not be the only move that the Pentagon will make to cut its spending. For example, the White House is already planning to stop the program of rearming the U.S. Air Force with advanced fifth generation fighter aircrafts.
However, along with the orders to withdrawal from Iraq, Obama gave the generals an order to nearly double the American military presence in Afghanistan within the next 18 months. The number of soldiers and officers in Afghanistan will increase from 35,000 to 60,000. In other words, now the White House will have to spend billions in Afghanistan. And yet, Obama will still save money because he will withdraw the majority of the 140,000 soldiers from Iraq, but send no more than 30,000 soldiers to Afghanistan.
How will these decisions by the new president affect oil prices? Some experts (though not many) believe that the withdrawal of U.S. troops from Iraq will lead to a dramatic stabilization of the region and reduce tensions. As a result, the Iraqi government will be able to establish an uninterrupted production and supply of “black gold” to the international markets. This, in those fantastically optimistic experts’ opinion, will lead to a sharp drop in oil prices.
However, considerably more experts believe that the withdrawal of American troops will inevitably lead to a civil war. Then, neighboring countries, including Iran and Turkey, will intervene in the conflict. This will almost certainly lead to the disintegration of Iraq into several parts. In these circumstances, one should not expect the situation in the region to stabilize, or the supply of Iraqi oil to increase.
It’s much more likely that almost all Iraqi oil wells will be conserved completely for many years and American oil companies located on Iraqi territory will suffer billions of dollars of losses. And this is the best case scenario. In a worse scenario, the oil wells may be set on fire by the guerrillas, insurgents, terrorists, or other armed forces, many of which are already present in Iraq.
Op-ed by Vitaly Bushuyev, Director of the Energy Strategy Institute:
The withdrawal of troops from Iraq is a political event. And in my opinion, it will not lead to any significant changes in the world market. First, it’s because the portion that Iraq contributes to the world’s oil production is not so significant. Secondly, today, fundamental factors like additional production and consumption do not have a significant impact on the price.
The economy is still the determining factor. Due to the decline in the global economic development rate, the demand for energy today is lower. Therefore, the withdrawal of the troops may cause the price to fluctuate within plus or minus 5 percent, but no more than that. Moreover, I think that the world market will play out in reaction to the news before the actual withdrawal happens.
these two vietnam type wars will bankrupt america.
ok america is already bankrupt but it will put the finishing touches on a failed reagan era economic policies.
most people dont have a clue what america is like.
we have 47 million people without health care insurance.
half of our bankrupties are due to medical costs.
americans dont lose any sleep over 100 thousand dead iraqis or 4 million displaced. they did not bat an eye over one million killed vietnamese which was a war for profits for the few.
there were protests but only due to the draft of college students. so the american war machine went for a private army. no protests this time in the streets.
recently I showed up for an iraqi war protest and I was the only one that showed up in a large city.
we have southern states that raise their children generation after generation to fight in these wars for profits and proud of their chilren for doing so.
we have been living on borrowed money for almost 30 years.
with communism man exploits man with capitalism it is the other way around.
ameicans cheered when the soviet union failed and as I suspected our time was soon to come to fail.
americans are not cheering now. the blame game is in full force. few will take on capitalism as the underlying reason for our decline.
capitalism has turned us into a very greedy and arrogant country. ie greed is good wall street.
will we learn. yes russia learned that american style capitalism does not work.
it is with sadness I write these words not hatred for america. please world forgive us for our aggression. only economic decline will stop our imperialism.