Fesharaki: WAR WON'T RAISE OIL PRICES/CHINA, FRANCE AND RUSSIA HOLD 'LUCRATIVE' AGREEMENTS WITH IRAQ


Date: 02-28-2003

Energy Expert Sees No War Benefits For U.S. Oil Companies

HONOLULU (Feb. 28) -- War in Iraq would not hurt Hawaii's gasoline supply, and, in fact, the state would likely end up paying much less at the pumps after any conflict there, an East-West Center energy expert said.

Fereidun Fesharaki said Hawaii does not import gasoline on a regular basis. Its crude oil comes from Alaska, Indonesia and Malaysia and is refined here.

"We expect the price of oil to rise initially but we expect it to come down quickly to perhaps 30 percent lower than present prices," said Fesharaki, who also works as a consultant to oil companies. "Hawaii supplies will not be affected."

Fesharaki also said Iraq has promised China, France and Russia oil-rich acreage under very lucrative conditions, and these countries, therefore, want Saddam Hussein "to stay in place because they have a vested interest.

"These offers by Iraq are equity shares, which have never been offered by Iraq in the past," he said.

Fesharaki said U.S. oil companies would not benefit much from war. Oil fields would be far too unstable and dangerous for U.S. oil companies to enter, and an occupying power in Iraq would not provide a sufficiently stable long-term fiscal system to entice companies to make substantial investments.

"It's a false assumption that U.S. oil companies are pushing war," he said. "There's not much to benefit. But if it happens, they'll want an equal share.

"This is not a war about oil. If you want high oil production and equity for Americans, accommodation with Saddam Hussein could easily be reached. This is not about taking Iraqi oil and giving it to U.S. companies."

Regarding world oil supply, the second quarter will see a seasonal decline in oil demand of about 1.5 million barrels per day -- equal to total Iraqi oil exports, he said. Saudi Arabia and other OPEC members also have excess capacity that they can add to the market, and the U.S. Strategic Petroleum Reserve can unleash 3-4 million barrels per day for several months, Fesharaki said.

The Venezuelan oil strike is actually denying more oil to the market than any resulting losses from Iraq. "Iraq is not that critical to the oil supply in the short term, but Iraq and Venezuela together will stretch the markets," he said.

Oil fields in Iraq's Kurdish area, with a total capacity of 20 billion barrels, have been claimed by Turkey for years. Turkey has U.S. assurances that the Kurds will not be allowed to take over those fields, he said. While Turkey has 100,000 troops ready to go in, the Kurds have 25,000. Shiites will claim oil fields in the south.

"This will be a very unhappy area and U.S. companies will not go in," Fesharaki said.

Fesharaki said fears that Saddam will blow up Iraq's oil fields rather than see foreign forces take them should be put in perspective. Whatever damage Iraq might cause will be "able to be fixed in three-six months."

Fereidun Fesharaki can be reached at ff@hawaii.rr.com. Through the weekend he can be reached by phone in Hawaii at 808-526-1769 or 808-781-1769. From March 3 to March 21, he will be traveling and can be reached at his international cell phone at (65) 9005-8427. All other times he can be reached at his Hawaii office at 808-944-3637.

Kang Wu, also an energy expert at the East-West Center, can be reached in Honolulu at 808-944-7521 or wuk@EastWestCenter.org.


WAR WON'T RAISE OIL PRICES/CHINA, FRANCE AND RUSSIA HOLD 'LUCRATIVE' AGREEMENTS WITH IRAQ

Energy Expert Sees No War Benefits For U.S. Oil Companies


HONOLULU (Feb. 28) -- War in Iraq would not have much impact on oil supplies or prices, an East-West Center energy expert said, and consumers would likely pay much less at the gas pumps after any conflict.

Fereidun Fesharaki also said Iraq has promised China, France and Russia oil-rich acreage under very lucrative conditions, and these countries, therefore, want Saddam Hussein "to stay in place because they have a vested interest. "These offers by Iraq are equity shares, which have never been offered by Iraq in the past," said Fesharaki, who also works as a consultant to oil companies.

Fesharaki said U.S. oil companies would not benefit much from such a war. Oil fields would be far too unstable and dangerous for U.S. oil companies to enter, and an occupying power in Iraq would not provide a sufficiently stable long-term fiscal system to entice companies to make substantial investments.

"It's a false assumption that U.S. oil companies are pushing war," he said. "There's not much to benefit. But if it happens, they'll want an equal share.

"This is not a war about oil. If you want high oil production and equity for Americans, accommodation with Saddam Hussein could easily be reached. This is not about taking Iraqi oil and giving it to U.S. companies."

If war comes, Fesharaki expects oil prices "to rise initially but to come down quickly to perhaps 30 percent lower than present prices."

The second quarter of the year will see a seasonal decline in oil demand of some 1.5 million barrels per day -- equal to total Iraqi oil exports, he said. Saudi Arabia and other OPEC members also have excess capacity that they can add to the market, and the U.S. Strategic Petroleum Reserve can unleash 3-4 million barrels per day for several months.

The Venezuelan oil strike is denying more oil to the market than any resulting losses from Iraq. "Iraq is not that critical to the oil supply in the short term, but Iraq and Venezuela together will stretch the markets," he said.

Fesharaki said oil fields in Iraq's Kurdish area, with a total capacity of 20 billion barrels, have been claimed by Turkey for years. Turkey has U.S. assurances that the Kurds would not be allowed to take over those fields, he said. While Turkey has 100,000 troops ready to go in, the Kurds have 25,000. Shiites will claim oil fields in the south.

"This will be a very unhappy area and U.S. companies will not go in," Fesharaki said.

Fesharaki said fears that Saddam will blow up Iraq's oil fields rather than see foreign forces take them should be put in perspective. Whatever damage Iraq might cause will be "able to be fixed in three-six months."

Fereidun Fesharaki can be reached at ff@hawaii.rr.com. Through the weekend he can be reached by phone in Hawaii at 808-526-1769 or 808-781-1769. From March 3 to March 21, he will be traveling and can be reached at his international cell phone at (65) 9005-8427. All other times he can be reached at his Hawaii office at 808-944-3637.

Kang Wu, also at energy expert at the East-West Center, can be reached in Honolulu at 808-944-7521 or wuk@EastWestCenter.org.
This is an East-West Wire, copyright East-West Center