TrimTabs Investment Research MEDIA ADVISORY:
Special Report on Iraq Oil:
US Occupation Responsible for $10 to $20 Price Spike per Barrel of Oil Says Robert Berke; Iraq Production Drops 1.5 Million BPD
Santa Rosa, CA - September 7, 2005 - We recently interviewed Robert Berke, editor and publisher of The Energy X File, about the impact of the Iraq War on crude oil prices. Mr. Berke has more than 25 years of experience as a student and investor in energy policy. Readers are welcome to contact him directly at adamnb at aol.com for further information on this issue.
TrimTabs Weekly Liquidity Review: Give us an overview of the supply and demand dynamics for crude oil worldwide.
Robert Berke: The balance between supply and demand is extremely tight. The world currently consumes about 86 million barrels per day (bpd) of crude oil. Supply exceeds demand by only about 500,000 bpd. Any supply shocks in addition to the situation in Iraq and Hurricane Katrina will have a dramatic effect on prices.
WLR: How much oil was Iraq producing before the Iraq War, and how much is it producing now?
RB: Before the Iraq War, Iraq's legal production was between 2.5 million to 2.8 million bpd, and an additional 500,000 bpd was smuggled. Thus, Iraq's total production was between 3.0 million and 3.3 million bpd. Current production varies depending on what infrastructure is being blown up on any particular day. According to the best estimates I have seen, Iraq's legal production is 1.0 million bpd. Add another 500,000 bpd from smuggling, and total production has dropped to about 1.5 million bpd, which is only about half of what it was before the Iraq War began.
WLR: How much do you estimate the loss of production from Iraq is costing consumers?
RB: I believe the 1.5 million bpd in lost production in Iraq has raised the price of crude oil by $10 to $20 per barrel. Assuming an impact of $15 per barrel, consumers are paying an additional $1.29 billion per day (86 million bpd X $15 = $1.29 billion), or $471 billion per year, for crude oil as a direct result of the Iraq War.
WLR: So if production in Iraq were now at pre-war levels, oil prices would now be spiking to about $55 per barrel rather than about $70 per barrel?
RB: Yes. The Bush administration argued that oil revenues would pay for the reconstruction of Iraq, but it did not anticipate the insurgency that developed after the main military campaign ended. Consumers are paying the price for the mismanagement of the occupation.