World fears an oil crisis

The political tensions in oil-producing nations, especially in Iraq and Libya, have sparked fear of oil shortage. The global market is worried that oil supply from Iraq may stop at any moment, which will lead to a huge rise in oil prices. If supply from Iraq halts then oil prices will easily reach $130 per barrel.

The suspension of production will equal 3.3 million bpd of Iranian oil supplies and 1 million bpd of Libyan supplies, including weak oil exports from Syria, Egypt and Yemen. Thus, the shortage of oil hit 5.4 million bpd, equivalent to the total oil surplus capacity of the OPEC countries.

 

The demand for oil at present is at its peak, specially in Gulf oil-producing nations where consumption has reached 10 million bpd. Consumption also increased in Iraq, Egypt, Iran and Indonesia.

Majority of the oil dependent nations rely on the rise in Iraq's crude oil production to over 8 million bpd by 2018.

These facts explain the state of fear experienced by oil-producing and oil-dependent nations, especially considering the decision of international oil firms operating in Iraqi oil fields to withdraw their workers. This will lead to a delay in the rise of crude oil production and also cause a surge in oil prices.

The US shale gas revolution as well as the easing of sanctions on Iranian oil exports have prevented tremendous increase in oil prices. These two factors will continue to prevent a rise in oil prices if Iraqi exports are suspended, however the world will lose a major source of cheap energy.

Losing the largest and most important source of oil will put more pressure on oil-producing nations to maintain a steady supply of oil. However, this pressure will arise from consuming countries other than the United States, as they will continue to invest in shale as long as the price per barrel is over $90-$100.

The rise in oil prices will be inevitable if crude oil supplies from Iraq to the outside world are suspended. The need of the hour is to conduct more research and exploration of new oil field and wells

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