Monday, 3 February 2003

War 'would mean biggest oil shock ever'

The world will suffer a bigger oil crisis than that during the Arab-Israeli conflict of 1973 if the US declares war on Iraq, according to leading US investment bank Goldman Sachs.

'The combined effect of Venezuelan and Iraqi disruptions has the potential to be the biggest shock in oil market history, even allowing for offsetting supply increases by other players,' says Gold man's respected analyst Jim O'Neill.

Crude oil prices of $31.10 per barrel - a two-year high - do not include any war premium, says the team. It argues that tight supply conditions, small inventories, and severe capacity constraints will see the price soar.

'A war could drive crude oil prices up by an additional $10-$15, or 30 to 50 per cent [to $46],' says Goldman's report, 'More Perfect Storm than Desert Storm'.

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