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Oil prices rose on Monday. fueled by jitters about a disruption in supplies after government forces in Iraq moved on the Kurdish-held city of Kirkuk and on oil installations seized by the Kurds in 2014.
The jousting between Baghdad and the Kurds came as markets were already weighing the geopolitical climate. including the possible reimposition of sanctions on Iran and the tumult in Venezuela.
Brent crude. the international benchmark. rose by 1.3 percent on Monday. to $57.91. close to the psychologically important level of $60 a barrel. Oil prices have been edging up since July and are now well above their early-2016 lows of less than $30 a barrel.
After notable decline in recent years. are oil prices now on an upward trend? And how would that affect the world economy?
What’s happening in Iraq?
After the Americans established a no-fly zone in 1991 that protected Kurdish areas from attack by troops loyal to Saddam Hussein. the Kurds carved out an autonomous region in northern Iraq. with its own government. parliament and military. The Kurdish region also exports its own oil. although Baghdad disputes the legality of these sales.
Kurdish fighters known as the pesh merga have played a central role. alongside Iraqi troops. in operations against the Islamic States.
Last month. however. the Kurds voted for full independence from Iraq. prompting an angry rebuke from Baghdad and threats of military intervention.
Both Turkey and Iran fear that an independence move by Iraqi Kurds could set off unrest among their own Kurdish minorities. The United States and most of the international community had opposed the referendum saying it could unleash ethnic conflict. break up Iraq and undermine the campaign against Islamic State militants.
On Monday. Iraqi forces said that they had reached the outskirts of Kirkuk. seizing oil fields and other sites from Kurdish forces.
How much oil is in Kirkuk?
The area around Kirkuk and the Kurdish region is one of the major oil-producing areas of Iraq. Analysts estimate that the region as a whole produces about 750.000 barrels a day of which around 400.000 comes from fields around Kirkuk that could be caught up in the conflict. The Kurdistan regional government exports about 640.000 barrels a day. according to the International Energy Agency in Paris. with about 300.000 coming from Kirkuk.
Iraq produces a total of about 4.5 million barrels a day.
Most of the oil exported from the Kirkuk and Kurdistan area goes north. through a pipeline across the border with Turkey. and then to Ceyhan. a Turkish port on the Mediterranean. Turkey has threatened to cut off those exports. although Ankara has taken no action thus far.
Why have oil prices moved higher?
Oil prices recently have become more sensitive to supply threats. such as the situation in Kirkuk.
Strong global demand and the agreement between Russia and OPEC to curb production have tightened the market and helped soak up some of the surplus. That means further reductions because of global crises become more important.
“We have got a cocktail of geopolitical risks that can certainly keep supporting prices and probably — if demand stays strong — contribute to pushing them higher.“ said Richard Mallinson. an analyst at Energy Aspects. a market research firm based in London.
What will this do to the cost of gasoline?
Rising crude oil prices have translated into modestly higher prices for consumers. The average price for a gallon of regular gasoline in the United States is about $2.50. a little less than 10 percent more than a year ago. according to the Energy Information Administration. a government agency.
In Britain. prices for unleaded regular gasoline have risen by about 4 percent to about 544 pence. or about $7.20. per gallon. according to data from the AA. an auto services group. Because of the high tax component in European fuel prices. the prices are less sensitive to fluctuating costs of crude than are gasoline prices in the United States.
There seems a good chance that oil prices will push at least modestly higher over the next few years. Oswald Clint. an analyst at Bernstein Research. said prices of $60 to $70 a barrel. or even higher. were likely.
Mr. Clint said he doubted that modest increases would drive fuel prices high enough to slow major economies like those of the United States or Germany. “In the range I am talking about. I don’t think so.“ he said.
Others say that higher prices could just encourage more supply. for example by shale oil producers in the United States. which would keep prices from escalating.
