Iraq is one of the world’s top oil exporters, so you would think that a recent attack by militants on its largest oil refinery amid a deteriorating security situation in the country would prompt global fears of oil shortages and spark a spike in prices.
Instead, prices are about where they were a year ago, although they have been creeping up in recent months. Why no panic? Iraq’s vast crude supplies are safe for the time being because the bulk of its oil production—about 2.5 million barrels a day—takes place in the south, far from the current insurgency, analysts say.
“Iraq oil production is spread throughout the country,” said Richard Mallinson, a geopolitical analyst in London. “So only about 10-15 percent takes place in the northern part of the country, which is where the current Sunni insurgency is being fought out.”
A Sunni militant group — the Islamic State of Iraq and Syria (ISIS), which now calls itself the Islamic State—is battling the Shiite-dominated central government. The rebels claimed late last month to have seized control of the Baiji oil refinery, but the government said it had retaken control of it.
Benchmark West Texas crude oil closed at a 10-month high of $107 on June 20. By Thursday, it had dipped to $104 a barrel, a sixth-straight daily drop. Still, global markets remain jittery about what the future could hold should Iraq’s sectarian and regional tensions worsen.