The Geopolitical Influence On Oil Prices

Surplus capacity has eroded from an excess of some 6 million barrels per day at the start of 2002 to between 1 million and 1.5 million b/d today, depending on the source of the estimate. This decline, while partially the result of demand strength and poor non-OPEC performance, also stems from political events.

The war in Iraq has had a significant impact on surplus capacity since 2003, and, according to the International Energy Agency, Iraq’s oil production continues to fall. In January, production had fallen to 1.79 million b/d from 2.25 million b/d in September. There was only a slight increase in February.