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Last Updated: Monday, 24 February, 2003, 17:11 GMT
Opec 'to maintain supplies in war'

Andrew Walker
BBC economics correspondent

Oil pipeline between Iraq and Kuwait
Iraq supplies only 3% of the world's oil
The president of Opec, the cartel of oil producing countries, has told the BBC that in the event of a war in Iraq the group will try to make good any resulting oil shortages.

Abdullah al Attiyah, who is also Energy Minster of the Arabian Gulf state of Qatar, warned however that Opec could not control prices if speculators forced them higher.

Crude oil prices are almost 60% higher on average than they were a year ago.

If war breaks out with Iraq, the price of oil is likely to rise sharply even more.

Risks of war

Iraqi supplies would probably cease completely, and shipping lanes out of the Gulf could be under threat.

Iraq currently accounts for something in the region of 2.5m barrels a day, about 3% of the global total.

Dubai refinery
Opec sees problems keeping tanks full if war spreads

Some officials in Kuwait have also suggested that at least some of their facilities, those near the border with Iraq, might also close for safety reasons.

And then there is the possibility of Iraqi attacks on other Gulf countries.

But the Opec president said the cartel would act if the world market would be short of oil as a result of conflict.

"First of all we wish not to see a war, but if anything happens to the oil market and puts the oil market in a dilemma, then Opec for sure will take appropriate actions to maintain the demand and supply, avoiding any shortage," Mr Al Attiyah told the BBC.

Limited action

If only Iraq's output is cut off, the group has enough spare capacity to cover the shortfall.

But if a conflict were also to restrict oil output in Saudi Arabia and Iran, Opec might find it more difficult to plug the gap in supplies.

And if prices go higher simply because traders start worrying about possible disruptions, then Opec would probably not be able to cope, and the world would have to live with a higher oil price for as long as fears persist, he said.

The price of oil is hugely important for the global economy.

As all businesses use energy, rising oil prices can eat into corporate profits.

And higher oil prices also leave consumers with less money to spend on other things.

There have been four major episodes of relatively high oil prices since the mid-1970s, all of them associated with either a global recession or pronounced deterioration in global economic performance.




SEE ALSO:
War-wary oil prices keep on rising
24 Feb 03  |  Business
Headaches ahead for Opec
13 Jan 03  |  Business


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