Andrew Critchlow reports from Iraq, where ISIS torched the Baiji oil refinery:
Iraq, Saudi Arabia, the Gulf states and Iraq – which together account for two thirds of the cartel’s production – are all now affected by the inexorable march of the Isil jihadists but appear powerless to prevent it due to the widening sectarian schism between the Sunni and Shia Muslims across the region in the wake of the Arab spring uprisings five years ago.
Oil ministers gathering to decide on production levels at Opec’s secretariat building in Vienna will normally stay clear of wider geopolitical issues during their deliberations in the Austrian capital. However, the threat posed by Isil and its brutal brand of Islamist extremism is likely to force politics onto the agenda. It certainly can no longer be ignored.
According to Daniel Yergin, the energy expert and vice-chairman of IHS, the business information provider, the biggest threat to oil prices is the political chaos that threatens to engulf the Middle East, combined with the West’s reluctance to intervene.
Now would be a very smart time to lift our ban on crude oil exports, and fast-track EPA approval of a new refinery or three. The former would provide some price cushion in case the worst happens in the Middle East. We’ve been enjoying sub-$100 oil for a while now, but prices could quickly double or triple if there’s a real threat to the Saudi fields or to the Straits of Hormuz. American frackers could make up a lot of the difference, but they have to be able to sell on the global market where prices are determined.
Congress could get serious about its “weights and measures” power, and limit the absurd number of gasoline blends our limited number of refineries are required to produce. And while they’re at it, whack the EPA a few times about the head and let the world know we’re serious about refining.
Doing so is just smart insurance against an oil shock like we haven’t seen since the late ’70s.