Iraq’s insurgency could mean a summer of pain at the pump

posted at 3:31 pm on June 12, 2014 by Erika Johnsen

So it begins.

Sectarian violence in Iraq sent the price of oil skyrocketing on Thursday, propelling both Brent and West Texas Intermediate up more than two percent amid growing concerns about a threat to global supply.

After a delayed reaction to turmoil raging in the country, oil prices soared as open warfare between rebel forces—threatening a reconquest of the country barely a few years after U.S. forces departed—and the government spilled on to the world stage. Iraq is a member of OPEC, second only to Saudi Arabia as one of the world’s largest producers of crude.

With violence threatening Iraq’s civilian population and overwhelming the country’s security forces, a shadowy group known as the Islamic State in Iraq and Sham (ISIS) has managed to seize control of key cities including Mosul, the country’s second-largest, Ramadi, Falluja and Tikrit. Fears about global supply mounted, as reports surfaced that Russian tanks had moved into beleaguered Ukraine, sending crude on a tear and overwhelming the impact of lackluster U.S. economic data.

Iraq’s oil production is still going about its usual business as of right now, and doesn’t look like there’s any imminently huge threat of disruption. As one group of Macquarie analysts put it, however, “Although attention on Iraq has faded over the past two years, we have continued to believe that the political stability there was at best fragile. If the current situation overflows into oil-supply disruption, the total volume at risk could be material.” And as of yesterday, this was happening:

Sunni Islamist militants from the Islamic State in Iraq and the Levant (ISIS) have rapidly expanded their control of Iraq as a whole. The group is now said to be within range of overtaking Iraq’s biggest oil refinery in the city of Baiji.

The Baiji refinery can produce over 300,000 barrels of oil per day and supplies oil to the majority of Iraq. The refinery is also tasked with supplying power to Baghdad, Iraq’s capital city. Iraq is OPEC’s second biggest oil producer. …

Security sources told Reuters that the ISIS jihadists drove into Baiji, the home of the refinery, with a caravan of armed vehicles. The militants then proceeded to burn down the court house and police station, and freed masses of prisoners from jails.

It’s impossible to predict how any of this is going to play out, of course, but markets are feeling pretty edgy right about now — and as Keith Johnson at Foreign Policy posits, Americans might have largely forgotten about the Iraq war, but it’s very possible they’re about to be reminded at the gas pump:

Depending on Iraq’s ability to rally its own security forces and successfully fight the group, the uprising could also upend Baghdad’s plans to increase oil production in other parts of the country and assert control over exports in the semi-autonomous northern region of Kurdistan. All that becomes hugely important when global oil markets are looking at growth in Iraqi production as the great hope to keep the world fully supplied.

“Iraq needs to deliver; it’s as simple as that. This is not good, irrespective of whether there’s a short-term impact or not,” said Amrita Sen, an oil markets analyst at Energy Aspects Ltd, an energy consultancy in London.

“You need a lot of incremental supply increase from Iraq, which the current dynamics are saying is not going to happen,” Sen said.

However, Baghdad’s efforts to fight the militants could have knock-on effects on the huge oil fields in southern Iraq that account for the bulk of Iraqi output. Every time the Iraqi government moves troops from the south to fight militants in other parts of the country, oil companies’ operations are disrupted because of security concerns. In fact, Sen said, the increased cost of security is undermining the appeal of Iraq’s massive and easy-to-extract oil reserves.

One bright spot in all of this is that the United States’ oil and gas production has lately exploded — no thanks to the Obama administration, I might add — which has helped to absorb some of the recent downswings in production from places like the also politically unstable Libya, Sudan, and Nigeria. Major disruptions or even just a lack of production growth from Iraq combined with the ongoing sanctions on Iran, however, could be a bridge too far to keep global gas prices below some very economically painful levels.


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Comments

Just great…EPA declares no electricity, and now no oil either..

at least none of either that we can afford.

txdoc on June 12, 2014 at 3:34 PM

Um, it hasn’t been under $3.00 since 0bama took over. You should make that “even more pain”.

cozmo on June 12, 2014 at 3:34 PM

Oil cronies!!l

Ben Hur on June 12, 2014 at 3:35 PM

…energy costs could skyrocket?
…Booooooooosh!

KOOLAID2 on June 12, 2014 at 3:36 PM

Barack Obama: “I think that I would have preferred a gradual adjustment. The fact that this is such a shock to American pocketbooks is not a good thing.” – 2008

Electrongod on June 12, 2014 at 3:36 PM

Um, it hasn’t been under $3.00 since 0bama took over. You should make that “even more pain”.

cozmo on June 12, 2014 at 3:34 PM

Yeah, but that’s been the New Normal. This will be the Newer Normal.

de rigueur on June 12, 2014 at 3:38 PM

Um, it hasn’t been under $3.00 since 0bama took over. You should make that “even more pain”.

cozmo on June 12, 2014 at 3:34 PM

Can hardly wait for it to hit $6/gal. Then I expect to hear Diane Fienstein screaming about greedy oil company profiteers and holding senate hearings on C-SPAN to personally grill CEOs that will accomplish nothing but the appearance of her appearing to do something.

hawkeye54 on June 12, 2014 at 3:38 PM

Um, it hasn’t been under $3.00 since 0bama took over. You should make that “even more pain”. cozmo on June 12, 2014 at 3:34 PM

It was $1.85 then.

Akzed on June 12, 2014 at 3:40 PM

Um, it hasn’t been under $3.00 since 0bama took over. You should make that “even more pain”.

cozmo on June 12, 2014 at 3:34 PM

Yeah, but that’s been the New Normal. This will be the Newer Normal.

de rigueur on June 12, 2014 at 3:38 PM

The future new normal will be $10/gal. But no worries, everyone will be making at least $15/hr so we will be able to afford it.

/SNARK

hawkeye54 on June 12, 2014 at 3:40 PM

Meh. They just blame it on increased summer driving and the evil oil companies.
And of course, ultimately, Bush.

leftamark on June 12, 2014 at 3:40 PM

And here I was just getting used to 4 bucks a gallon…

Jack_Burton on June 12, 2014 at 3:42 PM

It’s impossible to predict how any of this is going to play out, of course, but markets are feeling pretty edgy right about now

Does everybody poop?

libfreeorgan on June 11, 2014 at 9:23 AM

KOOLAID2 on June 12, 2014 at 3:42 PM

hawkeye54 on June 12, 2014 at 3:40 PM

We can keep gas at $10, but increase minimum wage to $100, then it be so much better. /s

Oil Can on June 12, 2014 at 3:44 PM

It’s global warming.

Galtian on June 12, 2014 at 3:45 PM

It was already $3.89 at the pump this morning here in Kentucky.

Johnnyreb on June 12, 2014 at 3:46 PM

Damn, just when it had “dropped” to as little as $3.39 in my area, now this happens.

Doughboy on June 12, 2014 at 3:47 PM

hawkeye54 on June 12, 2014 at 3:40 PM

We can keep gas at $10, but increase minimum wage to $100, then it be so much better. /s

Oil Can on June 12, 2014 at 3:44 PM

Say, I like the way you think. :)

“If you like your $10 gas, you can keep your $10 gas.”

hawkeye54 on June 12, 2014 at 3:48 PM

Woo Hoo, more pain!

bazil9 on June 12, 2014 at 3:49 PM

That Arctic oil reserve oil would be useful right about now, wouldn’t it?

Steve Eggleston on June 12, 2014 at 3:50 PM

Erika, even though your main energy beat was not as much clickbait as the others writers, a lot of the times I would read your posts and nod along silently. You’ll be missed. Good luck.

sauldalinsky on June 12, 2014 at 3:52 PM

That Arctic oil reserve oil would be useful right about now, wouldn’t it?

Steve Eggleston on June 12, 2014 at 3:50 PM

…Dude!…that was like seven years ago!

KOOLAID2 on June 12, 2014 at 3:53 PM

Woo Hoo, more pain!

bazil9 on June 12, 2014 at 3:49 PM

Get used to it. BOHICA.

hawkeye54 on June 12, 2014 at 3:53 PM

Erika, even though your main energy beat was not as much clickbait as the others writers, a lot of the times I would read your posts and nod along silently. You’ll be missed. Good luck.

sauldalinsky on June 12, 2014 at 3:52 PM

Ditto that.

bazil9 on June 12, 2014 at 3:54 PM

Erika, even though your main energy beat was not as much clickbait as the others writers, a lot of the times I would read your posts and nod along silently. You’ll be missed. Good luck.

sauldalinsky on June 12, 2014 at 3:52 PM

…and always informative!

KOOLAID2 on June 12, 2014 at 3:54 PM

Thanks alot, Obama.

sadatoni on June 12, 2014 at 3:55 PM

Oil company investigations in 4…3…2…1.

Oh wait democrat leftist Marxist in WH. Nevermind.

bgibbs1000 on June 12, 2014 at 3:56 PM

SOMEBODY should think of a plan, like a PIPELINE from CANADA to our refineries….

What would it be called???

originalpechanga on June 12, 2014 at 3:58 PM

When is Obama going to give Americans relief by subsidizing gerbil power as a new renewable?

BuckeyeSam on June 12, 2014 at 3:58 PM

One bright spot all of this is that the United States’ oil and gas production has lately exploded — no thanks to the Obama administration

Has there been one single thing that these creeps have gotten right? One single thing?

MisterElephant on June 12, 2014 at 4:01 PM

The future new normal will be $10/gal. But no worries, everyone will be making at least $15/hr so we will be able to afford it.

/SNARK

hawkeye54 on June 12, 2014 at 3:40 PM

We’ll all be entitled to $15/hr. but soon there won’t be enough $15/hr. hamburger flipping jobs for everybody. It will be like Obamacare– everybody will have insurance but nobody can see a doctor.

de rigueur on June 12, 2014 at 4:02 PM

When is Obama going to give Americans relief by subsidizing gerbil power as a new renewable?

BuckeyeSam on June 12, 2014 at 3:58 PM

Actually the plan is to issue to every household a human size hamster wheel connected to a generator for do-it-yourself electric power. Our continual contribution to the national grid.

hawkeye54 on June 12, 2014 at 4:02 PM

I think I will buy some futures on pixie dust and unicorn farts as this may be all Jugears will let us use.

txdoc on June 12, 2014 at 4:04 PM

When is Obama going to give Americans relief by subsidizing gerbil power as a new renewable?

BuckeyeSam on June 12, 2014 at 3:58 PM

Hey…that gerbil food is expensive…and they only make enough power to charge my iPhone…

PatriotRider on June 12, 2014 at 4:04 PM

Has there been one single thing that these creeps have gotten right? One single thing?

MisterElephant on June 12, 2014 at 4:01 PM

I think bin Laden is still dead. So they’ve got that going for them. Although given all the corruption and scandal in this regime, I’m starting to wonder if he really was killed in that raid(or maybe was dead long before that).

Doughboy on June 12, 2014 at 4:05 PM

Has there been one single thing that these creeps have gotten right? One single thing?

MisterElephant on June 12, 2014 at 4:01 PM

You are looking at it from a sensible point of view. Everything they do they HAVE gotten right…….for them.

hawkeye54 on June 12, 2014 at 4:06 PM

Energy prices will necessarily skyrocket.

agmartin on June 12, 2014 at 4:07 PM

Has there been one single thing that these creeps have gotten right? One single thing?

MisterElephant on June 12, 2014 at 4:01 PM

…I don’t know!…he has an ‘approval’ rating… above single digits!

KOOLAID2 on June 12, 2014 at 4:07 PM

I love the fact that Erika continues to post here. It must be driving coolrepublica crazy.

blink on June 12, 2014 at 3:38 PM

Yeah, what’s up with that? The commie ditz goes berserk on these threads whenever someone wishes Erika well.

Sounds like acute jealousy, which is understandable. Erika is self-confident, bright and gorgeous. The leftist ditz is pathologically unstable, has a big butt, a big mouth, and a small brain.

MisterElephant on June 12, 2014 at 4:07 PM

That Arctic oil reserve oil would be useful right about now, wouldn’t it? – Steve Eggleston on June 12, 2014 at 3:50 PM

So would that Keystone pipeline and stopping the closing of all those coal fired electrical plants. But this administration doesn’t have a clue about world affairs.

SC.Charlie on June 12, 2014 at 4:09 PM

…I don’t know!…he has an ‘approval’ rating… above single digits!

KOOLAID2 on June 12, 2014 at 4:07 PM

He could actually be in the negative digits and as long as he has a pen an phone to use without interruption, what does it matter?

I’ll be more impressed when a multitude gathers at the WH gate pitchforks, tar, feathers, and rails, ready for some assembly to conduct a procession of miscreants to run out of DC to the nearest prison.

hawkeye54 on June 12, 2014 at 4:13 PM

Energy prices will necessarily skyrocket.

agmartin on June 12, 2014 at 4:07 PM

One of the few truths to come from Bammy’s lips.

hawkeye54 on June 12, 2014 at 4:14 PM

You are looking at it from a sensible point of view. Everything they do they HAVE gotten right…….for them.

hawkeye54 on June 12, 2014 at 4:06 PM

Yep-Barry’s transforming America agenda is rolling right along.

bazil9 on June 12, 2014 at 4:15 PM

I think bin Laden is still dead. So they’ve got that going for them. Although given all the corruption and scandal in this regime, I’m starting to wonder if he really was killed in that raid(or maybe was dead long before that).

Doughboy on June 12, 2014 at 4:05 PM

Shoot, for all we know, bin Laden is advising Obama every day on middle east foreign affairs, and how to negotiate for POW’s.

leftamark on June 12, 2014 at 4:15 PM

One bright spot all of this is that the United States’ oil and gas production has lately exploded — no thanks to the Obama administration — helping to absorb some of the recent downswings in production from places like the also politically unstable Libya, Sudan, and Nigeria. Major disruptions or even just a lack of production growth from Iraq combined with the ongoing sanctions on Iran, however, could be a bridge too far to keep global gas prices below some very economically painful levels.

This is all good for GOP so I have no idea why some in the GOP are freaking out over Iraq. America will be hit less hard than China and Europe, which helps in terms of economic competition. And if gas prices rise in America significantly the GOP can hammer Obama even more about the XL pipeline and opening up more federal land for fracking/energy exploration.

This is all on Obama’s watch…let him figure it out and stop pushing the U.S. to jump wild into Iraq to save the Islamic world and the international oil markets. This is what I mean by the GOP being influenced too much by the investor and globalist sectors in this country. Why not do what is best for America for once…stabilizing the Islamic world so that oil prices in China and Europe do not go nuclear is not one of those.

William Eaton on June 12, 2014 at 4:16 PM

“…energy prices would necessarily skyrocket.” – B. Insane Obama

Barry LOVES ridiculously high gas prices. America gets exactly what they voted for.

Meople on June 12, 2014 at 4:16 PM

We’ll all be entitled to $15/hr. but soon there won’t be enough $15/hr. hamburger flipping jobs for everybody. It will be like Obamacare– everybody will have insurance but nobody can see a doctor.

de rigueur on June 12, 2014 at 4:02 PM

Which is why the Rats, at least the DemocRAT Party of Wisconsin, are now on record calling for a minimum income for all regardless of work.

Steve Eggleston on June 12, 2014 at 4:19 PM

So would that Keystone pipeline and stopping the closing of all those coal fired electrical plants. But this administration doesn’t have a clue about world affairs.

SC.Charlie on June 12, 2014 at 4:09 PM

They do have a clue – they WANT to duplicate North Korea here.

Steve Eggleston on June 12, 2014 at 4:20 PM

“…energy prices would necessarily skyrocket.” – B. Insane Obama

Barry LOVES ridiculously high gas prices. America gets exactly what they voted for.

Meople on June 12, 2014 at 4:16 PM

That is the part that burns me up the most. Forget blaming Obama for this mess I look at all the idiots that voted him for the 2nd term. One part of me wants this to go just where it is going to show these fools the consequences.

tej on June 12, 2014 at 4:24 PM

It’s already $4/gal in the Chicago area… Not good.

Fallon on June 12, 2014 at 4:24 PM

Iraq’s insurgency could mean a summer of pain at the pump

There may be pain at the pump this summer, but you won’t know it if you read the papers or watch the MSM on TV. There’s a Democrat in the White House…………

djm1992 on June 12, 2014 at 4:25 PM

Ya know, Mr. President, if we had built the Keystone XL pipeline, and allowed oil drilling on public lands and offshore the last 6 years, and not crippled refinery expansions with ridiculous restrictions on CO2 emissions, we wouldn’t have to worry about oil from Iraq.

Whatever happened to “No Blood for Oil”? If we drilled and refined our own oil right here, we wouldn’t need to shed blood for it!!!

Steve Z on June 12, 2014 at 4:32 PM

SOMEBODY should think of a plan, like a PIPELINE from CANADA to our refineries….

What would it be called???

originalpechanga on June 12, 2014 at 3:58 PM

A pipedream — as long as this administration holds the White House.

Alien on June 12, 2014 at 4:35 PM

But let’s stop the Keystone XL right leftist idiots?

jawkneemusic on June 12, 2014 at 4:46 PM

Gasoline has already jumped to 3.949 here.

sadatoni on June 12, 2014 at 4:46 PM

A pipedream — as long as this administration holds the White House.

Alien on June 12, 2014 at 4:35 PM

Ba-dum-dum-CHING!

Steve Eggleston on June 12, 2014 at 4:50 PM

I guess Recovery Summer V is on hold.

formwiz on June 12, 2014 at 5:20 PM

Hmmmmmm, Keystone Pipeline anyone????

Hmmmmmm, What about those new EPA regs on power plants????

Looks like Obama and his socialists are just plain stupid.

Hey, at least they hoisted the LGBT flag is Israel…..

In Iran, Syria and now Iraq – all gay people are being beheaded….

Doesn’t that piss off the gay army?

Maybe they can fight the Islamists by waving rainbow flags in their faces…. LOL!!!!!

redguy on June 12, 2014 at 5:20 PM

Gasoline has already jumped to 3.949 here.

sadatoni on June 12, 2014 at 4:46 PM

Obama don’t give a shit man!!!
The taxpayers pay fo his juice man!!! Now get the hell out.

redguy on June 12, 2014 at 5:22 PM

Iraq’s insurgency could mean a summer of pain at the pump

No, more like pain for hundreds of thousands of innocent people in Iraq….

The US will be fine once King Barack is overthrown.

We need an insurgency here!!!!!

The Republicans are just the flip side of democrats.

redguy on June 12, 2014 at 5:24 PM

“…energy prices would necessarily skyrocket.” – B. Insane Obama

Barry LOVES ridiculously high gas prices. America gets exactly what they voted for.

Meople on June 12, 2014 at 4:16 PM

Yeah, Obama is counting that Americans will flock to electric cars that get power from coal-fired power plants – oh wait…….

redguy on June 12, 2014 at 5:26 PM

Well Barack did say that under his administration, energy prices would skyrocket.

Seems that’s the only thing he said that wasn’t a lie.

GarandFan on June 12, 2014 at 5:38 PM

When I think about things that can go horribly wrong because of a civil war in Iraq, gas prices don’t even make the top ten. But reporters don’t understand the middle east, whereas they kinda sorta understand that gas prices go up and down.

Mahna Mahna on June 12, 2014 at 5:42 PM

Iraq
2h
Stocks hit by Iraq and oil; S&P 500 off for 3rd day – @CNBC

canopfor on June 12, 2014 at 6:09 PM

Iraq’s insurgency could mean a summer of pain at the pump

But, but, but…the OIL SANDS!

LMAO

Dr. ZhivBlago on June 12, 2014 at 6:14 PM

Iraq
2h
Stocks hit by Iraq and oil; S&P 500 off for 3rd day – @CNBC

canopfor on June 12, 2014 at 6:09 PM

Yeah, but it’s driving up precious metals.

Interesting to see how truly unstable the entire world economic system is, even though the facade seems to be rather shiny and intact with a Mickey D’s on every corner.

Dr. ZhivBlago on June 12, 2014 at 6:16 PM