After Iraq : Oil and Geopolitics

May 21, 2003 Topic: Security Tags: Peak Oil

After Iraq : Oil and Geopolitics

It is an understatement to say the aftermath of the war in Iraq is proving to be a difficult period.


Such a policy would provide a stable investment climate for construction of the pipelines and development of the fields to supply them.  It would also contribute to stability in the Russian economy that is dependent on oil for foreign income, develop secure supplies for the growing Asian market, complement OPEC's price structure, and balance French and other European political influence in Russia .  

Similar contracts should be written with Venezuela, Mexico, Argentina, Peru and Colombia.  The amount, price, and length of the contract would be specific to each country.  Such contracts would act as a flywheel on the world oil pricing system, remove investors' fear an oil price drop caused by the production they develop coming on stream, and prevent high price spikes from disrupting world economies because new diverse supplies at moderate prices would be available.   


The current oil pricing system, establishing oil prices by trading short-term contracts on the NYMEX, was established in the early 1980's to pull price control away from OPEC.  This pricing system worked fine for the last two decades, a period of surplus supplies, but it no longer meets our economic or geopolitical needs.  It is time for another change.  


Dr. Charles A. Kohlhaas is a former Professor of Petroleum Engineering at the Colorado School of Mines and has worked for, founded, managed, and consulted for major and independent companies in the international oil and gas industry.  He has written on questions relating to oil for In the National Interest in the January 15, February 12, and March 5, 2003 issues.