Word: crude
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...produces little more than 5% of that. Refineries operate at less than 30% of capacity. But the picture belies a deeper reality: Iraq is potentially the most important new player in the global oil market. Although each day brings fresh accounts of breakdowns in the country's crude-oil machinery--fractured pipe-lines, controls damaged by looters, rusting equipment, 1970s technology in the 21st century--Iraq is the only country capable of flooding the world with cheap oil on the scale of Saudi Arabia. And that poses a major test for Washington...
...seeing Iraq become a major producer on the scale of Saudi Arabia. That's because Russia is a major exporter itself, earning billions in oil revenue. Though Russia might ultimately open its spigots wider than Saudi Arabia's, which it did as recently as 1991, it cannot produce crude as cheaply as Iraq...
...would think that the world's largest oil producer would be financially secure no matter what the competition. But one would be wrong. In 2000, Saudi wells produced 8.1 million bbl. of crude oil a day; the country's high-quality Arabian light sold for an average $26.81 per bbl. That was enough to put the kingdom in the black, a rare achievement. In 16 of the past 17 years, the Saudi government operated at a deficit as its oil revenue failed to keep pace with its spending. As a result, the country that everyone thinks is synonymous with wealth...
...long-term prospects, the Iraqi oil industry is at the moment a shambles, unable to produce enough crude oil and refined products to satisfy domestic demand, let alone export to the world. As gas stations in Baghdad run out, a black market has sent prices skyrocketing. When the U.S. trucked in gas from Kuwait last week, prices began dropping. Refineries are limping along, largely because of a lack of electric power. The Basra refinery, Iraq's second largest, is running at less than half of capacity for another reason: lack of chemical additives for the leaded fuel that Iraq...
Falling oil prices allow consumers to spend money they otherwise would have sent to Saudi Arabia. Crude peaked at $37.82 per bbl. in March and had tumbled to $27.35 by last week. Gasoline prices won't come down fast, but prices at the pump are already falling. The drop in oil spending will put an additional $337 in the pockets of the average household by the end of 2004, according to one estimate...