Developments In Iraq And Implications For Oil Prices

One of the most prominent factors for oil prices are certainly geopolitical and stability factors. Development and stability in the Middle East, as one of the top oil-producing area in the World, had always been tied to the oil prices, with high growth being accompanied by sharp falls.

The situation in Iraq has had several destabilizing effects on oil prices in the past. As a result of Iraq’s invasion of Kuwait in the 1990s, the oil price has skyrocketed over 100% in just nine months, with the price reaching the peak in October the same year and average price per barrel going over 36 USD. The price has begun to fall with the concern about the supply of this energy product decreasing only after the coalition armies achieved their military success over Iraqi forces.

Iraq OilSince 2003 and removal of Saddam Hussein by US-led actions, Iraq remained a highly unstable region. The dispute over the oil-rich area around the city of Kirkuk and the autonomous region of Kurdistan had shaken the stability again, and Sunni Muslim rebels have continued using violence destabilizing the government even more. Then in 2014. price of oil was again fluctuated by conflicts and stability jeopardized. The rebel goal was establishing the great Sunni state and if succeeded they would deepen the already existing conflict between Sunita and Shiite populations.

Today, with the fall of ISIS being imminent, and Iraq making efforts to not transform into a new state of civil conflicts. Iraqi efforts to increase its capacity and oil production and the continuation of its research plans, with a clearer political strategy that will meet demands for security and economic opportunities and development is likely to be a less destabilizing factor on oil price.

The nature of the energy market, especially the oil market, is such that is extremely susceptible to expectations and speculation. There is still a great dependence on the Iraqi oil as it is the fourth country in the World’s oil reserves, and developments in this region will always have a global impact on supply and a major factor in the price for this product.


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