Posted on 04/09/2002 3:35:34 PM PDT by snopercod
Two big oil nations - Iraq and Venezuela - halted shipments Monday, sparking fears of a shortage.
Iraq, which pumps 2.1 million to 2.4 million barrels a day, or about 3% of world supply, halted shipments to protest Israel's actions in the Palestinian territories.
The embargo will last one month or until Israel withdraws, Iraq said. Israel began pulling out of some cities Tuesday morning.
Meanwhile, a strike in Venezuela blocked oil from OPEC's No. 3 producer, costing the market 2.8 million barrels a day, or 4%.
To make matters worse, a huge refinery shutdown in St. Croix, U.S. Virgin Islands, gave an added boost to gasoline. May gasoline leapt 3% to 84 cents a gallon.
But oil players didn't seem too concerned. May crude climbed just 33 cents to $26.54 a barrel. An early scramble for supply pushed it up $1.02 to $27.23. But any sense of panic ebbed as the day wore on.
The two nations most likely to follow Iraq's lead are Iran (OPEC's No. 2 producer) and Libya. But the fact that they haven't jumped on board yet suggests they won't, says Bill O'Grady, director of futures research at A.G. Edwards & Sons in St. Louis.
What's more, Iran and Iraq are old foes. Iran also has threatened to cut oil supplies, but won't want to be seen following Iraq's move.
The good news, O'Grady said, is that Iraq's stoppage will be brief.
"Everyone knows the IDF (Israel Defense Forces) will be out of there within a week or so," O'Grady said. Iraq will take credit for the withdrawal and win points with the Arab street - which it desperately needs these days. And Iraq's oil will flow again.
The bad news is that other producers, like Saudi Arabia, probably won't make up the difference.
This isn't Iraq's first stoppage. Nearly every time the U.N.-Iraq oil-for-aid deal is renewed, negotiations stall, and so do Iraq's exports. Others in OPEC usually make up the shortfall. Saudi Arabia, by far OPEC's top producer, also has the most unused capacity.
Man On The Street
"It would look politically bad. It would look to the Arab street like they (any producers who make up for Iraq's loss) are supporting Israel," O'Grady said.
Still, if O'Grady is right and this action lasts just a few days, it won't make a difference.
O'Grady said the Venezuela stoppage is more important and has more long-term implications.
"The problem is that (President Hugo) Chavez has been trying to undermine the state oil company, Petroleos de Venezuela," or PDVSA, he said. Chavez covets its revenue, the nation's oil wealth, for his pet government projects.
Chavez has installed cronies in the top levels of the firm, kicking out board members and the president - executives with years of oil industry expertise. The remaining workers, enraged at what they see as the rape of PDVSA, have staged protests and strikes.
On Monday, in a move to kill the revolt, Chavez sacked seven executives and forced out 12 others.
Oddly, O'Grady thinks this could send oil lower - if Chavez's erratic nature costs him his job.
Before Chavez took office, Venezuela welcomed foreign investment to lift output and capacity.
But Chavez was at the heart of the 1999 OPEC deal to cut output. That started oil's long trek from $10 a barrel to $37.80 in September 2000.
Reports say Venezuelan output has crashed 40%, and loadings at ports stopped over the weekend.
To make matters worse, a huge refinery shutdown in St. Croix, U.S. Virgin Islands, gave an added boost to gasoline. May gasoline leapt 3% to 84 cents a gallon.
I think it is an annual springtime tradition that a "refinery fire" or other breakdown occurs. Jeez, if I were a cynic (I am) I would think these things are planned to heighten summer time gasoline prices, or at least provide the cover story for the increases. Kind of like that "summer drive season" price hike that "surprises" refiners every year for the past forty or so. You'd think some enterprising company in our "free" market would anticipate this seasonal increase, and undersell its competitors.
More socialist destruction of a country's economy. Politicians (including ours) never learn.
As long as any idiot that says he saw a blue and red spotted gopher fish can stop the building of refineries and power plants, we won't have any new ones.
Funny thing about these eco-nazis. They like to drive their cars to the anti-refinery protests but they don't want any refineries to make the gas. They like to turn on the lights in their houses, but they don't want power plants built. I guess they think the tooth fairy is going to put gass in their cars and the Great Pumpkin is going to generate electricity.
They are the Dems. Check out who in the Senate voted against drilling in ANRW and who votes against every effort to allow American companies to exploit American resources.
Thanks to the enviralists who hate America/Americans besides blocking any drilling for new oil supplies, they have blocked the construction of any new oil refineries in America. The ones in Cali are old, energy inefficient, un predictable and dangerous.
The enviralists, the political arm of the Opecker Princes at work in America 24/7/365 to maintain and increase the dependence on Opecker Oil. They and Mullah Shorty Da$$hole have done a great job in increasing our dependence on Opecker oil.
Second, I doubt you'd be so adamant about Israel getting back in their "box" if there were 300 million lunatics living around you who woke up every day with one thought in mind...how to wipe you from the face of the earth. Or if several hundred thousand of these lunatics lived WITH you, and tried to kill as many of your innocent friends and family, and you of course, every chance they got.
Right now, the world oil prices can be blamed on one thing, SOCIALISM. Chavez is a socialist intent on wrecking the oil industry in Venezuala, and Iraq is being encouraged and propped up by socialists around the world. Without that, there would already be a new government in Iraq, and their production stabilized.
Oh, and BTW, they never cared one bit about the Palestinians until they got in trouble and needed to align themselves with the (world) left's favorite tool to strike back at democracy and capitalism, i.e., Israel and the US, the Palestinian terrorists.
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