I am going to explain this game in simple terms and broad generalities... I hope this helps you quickly and easily understand why Iraq is so important to the trade. Lets assume the following:
- The World produces about 92 million barrels of oil per day, unfortunately the world uses about 92 million barrels of oil per day, so there is very little room for error.
- US produces about 8 to 8.5 million barrels of oil per day, but we use about 18-19 million barrels per day.
- Iraq produces about 2-3 million barrels per day.
- Total "extra" surplus in the world is thought to be around 1.4 to 1.5 billion barrels, with the US holding about half of that total "extra" world surplus in our Strategic Petroleum Reserves.
Bottom line, you take Iraq's oil out of the global equation and the market freaks out! Upsetting this delicate balance in any way, shape or form tends to make the energy markets extremely nervous. Many analysts believe a complete shutdown in Iraq could prompt crude oil prices to soar to $150 per barrel or perhaps even higher, maybe $200 per barrel on the knee-jerk.