Iraq Fighting Spills Oil

Above: The Mahdi Army has taken control of Basra.

Crude oil prices rose to $107.58 a barrel (up 1.68) in New York, after a pipeline explosion in Iraq cut one of the main supplies to the country’s main oil export terminal. The Zubair-1 pipeline is one of two that transport oil to the Basra terminal.

Although the Iraqi oil ministry is still not certain as to what caused the explosion, they pretty much have a concrete idea. The ongoing clashes in the area between Iraqi forces and Muqtada al-Sadr militants (shown in picture above) are now on its third straight day. Muqtada al-Sadr is one of the most influential Shiite clerics and political figures in Iraq. He is known to be anti-US. His Mahdi Army has just taken Basra hostage; possibly smuggling oil themselves to fund their cause.

Prime Minister Nouri al-Maliki vigilantly wants to rid Basra of all militia. A lot of international communities are dependent on the success of his Operation Saulat al-Fursan, or Charge of the Knights.

“We have come to Basra at the invitation of the civilians to do our national duty and protect them from the gangs who have terrified them and stolen the national wealth,” he said, speaking from inside his Basra HQ. “We promise to face the criminals and gunmen and we will never back off from our promise.”

Above: Black smoke fills the Basra city air. Not far from them is the burning Zubair-1 pipeline.

But the fighting has now spilled even more blood than what is in Basra. The world is now taken hostage as they seem to take control of our main energy source.

A US analyst said that “Moqtada al-Sadr isn’t helping things in the market. Unrest in Iraq is nothing new, but because of its location Basra matters to the oil market.”

The Basra terminal can hold up to 1.97 million barrels of crude oil per day. According to data posted in the Iraqi Oil Ministry’s website, the terminal was accountable for 80 percent of Iraq’s total oil export (which is around 2.32 million barrels per day) last month. Iraq is behind only to Saudi Arabia and Iran in proven oil reserves (it is estimated at 115 billion barrels).

Another analyst from the US said that “the market will get significantly tighter if the roughly 2 million barrels a day we get from southern Iraq is taken offline.”

“Iraq exports have been quite steady for the last six months, so the crude markets will feel the loss of these supplies,” said one UK analyst. “A lot of crude is at risk.”

More than oil, innocent lives are at risk. We all know how important oil prices are in regulating basic commodities. The slightest increase in oil prices multiplies into huge increases in basic food prices. This is the ugliest picture of war: when fighting spills across borders and affects even the most remote areas.

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