STILL IRAQ-ING DOWN THE HIGHWAY

But how much longer can we? And how much will it cost us at the gas pump?

Yes, Iraq is still rocking.

Rockier still is the task of interpreting conflicting analyses of the impacts of this week's events on world, and US, oil supply.

Iraq's largest oil refinery was set ablaze this week. Smoke from the fire is visible from space.

 



Clearly the refinery, and the city, were attacked. But we don't yet know who controls the Baiji refinery, the largest in Iraq. Journalists are reporting that the militants are now in now control, but a military spokesman is denying the reports, according to Aljazeera.

In an interview with NPR, Robert McNally, president of the Rapidan Group, an energy consulting firm, reported that the price of oil climbed nearly 4% in just a few short days following the refinery attack, "This jaw-dropping blitz assault ... and the threat it posed to the Baiji refinery, the Baiji electrical power plant, and really the stability of Iraq itself, just caused the market to panic,"   Though the militants are still a long distance north from Iraq's main oil producing region of Basra, on the Persian Gulf, Amrita Sen, chief oil market analyst with Energy Aspects in London, says that distance doesn't provide much relief, for two reasons. "One, the militants are progressing towards the south very, very quickly. And two, the Iraqi army's complete inability to stop them ... The fear factor is huge in the market at the moment." McNally adds "There's also concern the Sunni militants' all-out charge through Iraq could spark widespread sectarian violence, possibly pulling in regional players."

Others say that 4% is a small blip and that an insurgence far enough to the south to impact the main producing areas is unlikely. A Vox  headline stated "ISIS surrounded Iraq's largest oil refinery. Why aren’t oil prices spiking?" The piece points out that the most important reason for the minimal reaction is that Baiji isn't important to the global oil supply, and quotes Steve Mufson of the Washington Post, who explains, "Baiji doesn't really export petroleum. It's mostly responsible for domestic supply, and largely within the areas contested by ISIS at that. Since Baiji doesn't produce for export, global markets aren't all that concerned."

But, as stated by The Economist,  "...as on so many occasions since 1980, war, sanctions and domestic upheaval have constrained the huge potential of OPEC’s second-biggest producer. The chances of restarting exports from northern Iraq (via a pipeline crippled by sabotage in March), and of investment and modernisation in the country’s south, are looking slimmer by the day."

But CNBC reports on a Citigroup analysis, which says that oil production could increase because of the conflict. "Our base case is in the short run, we do get more oil. That base case is based on the Kurdistan Regional Government maintaining its independence and security and Baghdad maintaining its control over the southern oil field," said Edward Morse, head of global commodities research at Citigroup.

Back and forth and forth and back...
Wouldn't it be better to not have to worry locally about an international situation over which we have no control?

Even with these conflicting predictions, one thing is abundantly clear. To quote Jordan Weismann's Moneybox blog on Slate,  Iraq's crisis should make us thankful for America's oil boom. As he states, this boom is making the world oil markets more resilient. Were it not for the US drilling revival, the market would be far less equipped to deal with even small disruptions, much less something catastrophic.

When can we add oil and gas production offshore Santa Barbara to this boom? SOS would be able to add "stabilization of world oil markets" to the list of local benefits including cleaner air, water, and beaches: increased funding for county services; and increased funding for renewables.