UT Prof: Unrest, War Fears Boost Oil Prices

KNOXVILLE — A University of Tennessee-Chattanooga oil industry analyst says recent increases in fuel prices in the United States are partially due to fears of war Iraq and political instability in Venezuela.

Dr. Ziad Keilany said many Americans don’t realize that a substantial portion of crude oil imported by the U.S. comes from Central and South America.

“Mexico and Venezuela are reliable producers of oil for the United States and a big chunk of our consumption comes from those two countries,” Keilany said. “Now, Venezuela’s oil production has plummeted and we’re feeling the impact of that.”

Production slowed to less than two million barrels a day, Keilany said, because employees of Venezuela’s petrochemical companies were fired after a job walkout to protest President Hugo Chavez’s administration. But production is expected to eventually return to pre-strike levels of approximately three million barrels a day.

Keilany said the possibility of war with Iraq is also driving much of the increase in fuel prices, but contrary to the popular anti-war slogan, “No Blood For Oil,” the major oil companies are not eager for conflict in the region.

“The companies don’t want war because it would disrupt their source of oil to sell,” Keilany said. “You see, they buy it from oil-producing companies and sell it in the United States. Should there be a war, they would lose easy access to that supply.”

“But don’t kid yourself – the companies are enjoying the high prices right now, and I guarantee you that in a short amount of time their balance sheets will show a substantial profit,” Keilany said.