The invasion of Iraq by Britain and the US has trebled the price of oil, according to a leading expert, costing the world a staggering $6 trillion in higher energy prices alone.
Oil economist Mamdouh Salameh, who advises both the World Bank and the UN Industrial Development Organization (Unido), told the Independent on May 25 that the price of oil would now be no more than $40 a barrel, less than a third of the record $135 a barrel reached last week, if it had not been for the Iraq war, Independent said.

Price of oil would now be no more than $40 a barrel if it had not been for the Iraq war.

He spoke after oil prices set a new record on 13 consecutive days over the past two weeks. They have now multiplied six fold since 2002, compared with the fourfold increase of the 1973 and 1974 “oil shock“ that ended the world’s long postwar boom.
Goldman Sachs predicted last week that the price could rise to an unprecedented $200 a barrel over the next year, and the world is coming to terms with the idea that the age of cheap oil has ended, with far-reaching repercussions on their activities.
Salameh, director of the UK-based Oil Market Consultancy Service, and an authority on Iraq’s oil, said it is the only one of the world’s biggest producing countries with enough reserves substantially to increase its flow.
Production in eight of the others--the US, Canada, Iran, Indonesia, Russia, Britain, Norway and Mexico--has peaked, he says, while China and Saudia Arabia, the remaining two, are nearing the point at of decline. Before the war, Saddam Hussein’s regime pumped some 3.5 million barrels of oil a day, but this had now fallen to just two million barrels.
Salameh told the all-party parliamentary group on peak oil last month that Iraq had offered the United States a deal, three years before the war that would have opened up 10 new giant oil fields on ’generous’ terms in return for the lifting of sanctions. “This would certainly have prevented the steep rise of the oil price,“ he said. “But the US had a different idea. It planned to occupy Iraq and annex its oil.“
Chris Skrebowski, the editor of Petroleum Review, said, “There are many ifs in the world oil market. This is a very big one, but there are others. If there had been a civil war in Iraq, even less oil would have been produced.“
At just under 86 million barrels per day, global oil production has, essentially, stagnated since 2005, despite soaring demand, suggesting that production has already reached its geological limits, or “peak oil“.
Recession in the West may not provide relief on prices. There is increasing demand from countries such as China, Russia and the OPEC countries, whose consumers are cushioned against rising prices by heavy subsidies. The future could unfold in a number of ways:
Fuel subsidies could suddenly be scrapped, dousing demand. Cost pressures have forced Malaysia, Indonesia and Taiwan to cut them, but China is hardly strapped for cash. OPEC producers are under no pressure to abolish subsidies; as the oil price rises they get richer. Prospect: very unlikely.
Peace could break out in Iraq, the long-disputed oil law agreed, and international oil companies start work on the world’s largest collection of untapped oil fields. Prospect: vanishingly unlikely.
Deep recession in the West might cut oil consumption enough to offset growth in the developing world.
Russian oil output has gone into decline; Saudi Arabia has shelved plans to expand production capacity, and advisers to the Nigerian government predict its output will fall by 30 percent by 2015. More news like this, expect oil at $200 a barrel.
Big oil producers will increasingly divert exports for home consumption. OPEC, Russian and Mexican exports expected to fall, pushing oil to $200 by 2012.
After 150 years of growth, the oil age is beginning to come to an end. “Peak oil“ is the common term for when production stops increasing and starts to decline. At that point what have been ever-expanding and cheap supplies of the resource on which all modern economies depend become scarcer and more expensive, with potentially devastating consequences.
Pessimists believe that production has passed its peak. Optimists say it may be 20 years or so away--which would give us some time to prepare--but are now muted. Last week the hitherto optimistic International Energy Agency admitted that it may have overestimated future capacity. Chris Skrebowski, editor of “Petroleum Review“ and once an optimist himself, believes that the world is now in “the foothills of peak oil“. Prices may ease a bit over the next few years, but then the real crunch will come.
Oil provides 95 percent of the energy used in transport, so this will be hit hard and soon. People are likely to go on using their cars, but airlines are expected to be the first to suffer.

Ukraine’s president called on regional nations on May 24 to diversify westbound energy export routes now dominated by Russia.
According to AP, Viktor Yushchenko said at an energy summit in Kiev that it is necessary to minimize the potential for political interests to affect energy supplies.
“Energy issues often acquire political overtones,“ Yushchenko said, addressing leaders of six nations whose ties with Russia over energy and other issues are tense. “The term ’energy blackmail’ is already rooted in the diplomatic vocabulary.“
He did not mention nations by name, but Ukraine and Western countries, including the US, have accused Russia of using its energy might as a political tool.
The meeting is widely seen as part of Ukraine’s drive to become a transport corridor for Caspian Sea oil and reduce Eastern Europe’s dependence on Russian energy supplies.
The summit in Kiev coincided with energy talks between Prime Minister Yulia Tymoshenko and Russian counterpart Vladimir Putin, who met during a gathering of premiers from the Russian-dominated Commonwealth of Independent States in neighboring Belarus.
Tymoshenko said Ukraine, which depends heavily on Russia for energy, is hoping for a long-term agreement on natural gas supplies soon.
Political tension between Russia and Ukraine has been deepened by energy price disputes that have caused concern in Europe over the reliability of Russian supplies transiting Ukraine.
“We very much expect the beginning of talks on a strategic agreement,“ Tymoshenko told Putin. She said Ukraine understands that it must gradually work its way up to paying market prices.