White House Admits IT'S ALL ABOUT OIL (english)





By Toby Harnden - News Telegraph (via KD) 7:36pm Thu Sep 19 '02 (Modified on 8:00pm Thu Sep 19 '02)


article#204394





The White House had previously been reluctant to talk publicly about the potential economic benefits of military action for fear of being accused of going to war over oil.





Ousting Saddam 'would be good business'


By Toby Harnden in Washington


(Filed: 17/09/2002)


http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2002/09/17/wirq217.xml/





Saddam Hussein's removal from power would be a great boost for the global economy even though war in Iraq could cost America up to £140 billion, the White House has said.





Larry Lindsey, President George W Bush's economic adviser, said increased oil production in a free Iraq could drive down oil prices.





"When there is a regime change in Iraq, you could add three million to five million barrels [per day] of production to world supply," he said. "The successful prosecution of the war would be good for the economy."





But Mr Lindsey said the bill for war could be up to four times a previous estimate by the Pentagon of £35 billion. He did not provide a breakdown but the Pentagon figure included the cost of transporting and supplying troops and producing smart bombs.





The last Gulf war in 1991 cost £40 billion.





In an interview with the Wall Street Journal, Mr Lindsey said the cost would not be enough to push America into recession or spark a rise in inflation.





On the contrary, removing Saddam would take away a "huge drag on global economic growth for a foreseeable time". He said: "It's hard for me to see how we have sustained economic growth in a world where terrorists are running around."





Some American opponents of war have suggested that the economy could be severely damaged by military action. This was dismissed yesterday by Paul O'Neill, the US treasury secretary, in a speech in Portland, Maine.





"Whatever it is that's finally decided to be done, we will succeed and we can afford it," he said.





The White House had previously been reluctant to talk publicly about the potential economic benefits of military action for fear of being accused of going to war over oil.





In an effort to offset the effects of a temporary disruption in oil production from Iraq, the Bush administration has been steadily increasing the amount held in the strategic petroleum reserve.





There are currently about 600 million barrels - a month's supply - in the emergency oil stock kept in underground salt caverns along the Gulf of Mexico. The reserve was established after the 1973-74 oil crisis to protect America against sudden supply reductions.





Oil was discovered in Iraq in 1927 at the site of what was believed to have been the "burning fiery furnace" of King Nebuchadnezzar.





Now it has reserves of at least 112 billion barrels, second only to Saudi Arabia's 261 billion. But Iraq's oil production has dropped to 1.7 million barrels a day, compared to 3.5 million barrels before the Gulf war in 1991.





The oil price is currently hovering around $30 a barrel. This figure has gone up as anxieties over war have increased. Daniel Yergin, chairman of Cambridge Energy Research Associates and author of The Prize: The Epic Quest for Oil, Money and Power, said he expected that the oil price would go up to $35 or even $40 per barrel at the start of an Iraqi conflict. But this would probably drop swiftly.





In the long term, he argued, the effect on oil prices would depend on whether US military action stabilised or destabilised the Middle East, where two thirds of the world's oil is produced.





"A viable, solidly grounded and happy democracy in Iraq would be good for Iraqis," said Dr Yergin. "It would also be good for the region and for the world economy."





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