What if oil goes above $200 a barrel?

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What if oil goes above $200 a barrel?
hurriyet daily news - [10/7/2011]
Here is a scenario that would further deepen the global economic crisis and could send political conflicts into deadlock:

• The Arab unrest spreads to the oil-producing regions of several Gulf Cooperation Council countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – forcing suspensions of oil production. Libyan oil does not come online as quickly as hoped and Algeria has production problems.

• The United States withdraws from Iraq and decreases its presence in the Persian Gulf. Iran emerges as a major military and political force in the region. Uncertainty over Venezuelan President Hugo Chavez’s illness causes the regime to collapse; the majority of Venezuelan oil goes off the market.

• Oil price surges to more than $200 a barrel on speculation. Spot shortages in the oil market start to become more frequent.

In order to add a local angle, Turkey’s position as a transit country between oil and gas-producing and consuming regions could be of particular importance. So:

• Turkey and its neighbors must address the problem of regional energy security to maintain economic growth and regional stability.

That was the scenario debated in Istanbul yesterday with host ـmit Boyner of the Turkish Industry and Business Association (TـSفAD) and with the coordination of the U.S.-based geopolitical analysis institution Stratfor, under the title of “Global Energy Strategies Simulation: Turkey’s Next 10 Years.” Turkish Foreign Minister Ahmet Davutoًlu and Energy Minister Taner Y‎ld‎z were attracted by the program as well.

Stratfor founder George Friedman conducted a panel under the title “Role of Countries in Energy Dynamics” where scholars and experts from the U.S., Russia, Saudi Arabia, Iraq, Iran, Azerbaijan, Georgia, Germany and Turkey discussed the issue.

Perhaps $200 per barrel is not a threshold worrying enough for energy experts who have seen lots of ups and downs in oil prices because of the political crises and wars in the region in the last 30 years. The situation did not change much when the debate shifted to the $30-per-barrel scenario. Major players in the oil industry will not change their strategies, rely on their reserves or try to push prices up again.

Russia, Iran, Saudi Arabia and Azerbaijan, for example, would see the crisis as an opportunity to increase revenues. The U.S. would not change its Iran policy to ease the sanctions (to let Turkey use the existing Turkmenistan-Iran-Turkey pipeline, for example). Iraq would look at its competitor Saudi Arabia, but would not let Turkey down through the existing Kirkuk-Ceyhan pipeline, underlining that it would be up to the Kurds in the north to take care of its security. Azerbaijan would call Turkey to revise its resale policy into a pure transit-country one. Turkey and Germany, both being downstream for Russian gas, would call for the release of strategic reserves to bring prices down in order to sustain their economies.

But there is no clear way out of a deepened crisis if the oil price goes above $200 a barrel. Oil producers would enjoy it while the U.S. wouldn’t change its energy-security stance because of it, leaving oil-importing countries to suffer.