According to a US-based Global Insight publication, a US-led military campaign against Iraq will likely cause oil prices initially to spike above $40 per barrel at the start of military operations, but retreat as it becomes evident that the hostilities are not going to cut off supplies.
This forecast is part of the financial information company’s prediction, having a 60 percent chance of probability. In this baseline scenario the war will start before the end of March and will be concluded within two months, with fewer than 1,000 casualties on the coalition side and without any heavy damage to Iraq's non-military facilities.
The dollar will continue its gradual decline, losing about four percent of its value against other industrial country currencies over the course of 2003. Regional uncertainties, along with the lingering shortages caused by the Venezuelan oil strike, will result in an average price of $31.5 per barrel during the first quarter of 2003, but drop to the low $20s for the remainder of the year. The annual average is expected to reach $25.3 per barrel. Oil-exporting countries quickly fill any gap created by temporary disruptions of Iraq's oil production.
Global Insight’s second scenario, bearing a 20 percent probability rate predicts either a regime change in Iraq without any external military intervention, or a war of extremely short duration with minimal adverse effects on consumer sentiment and business confidence. The global and US economy will perform even better than in the baseline forecast.
The third scenario, with a 10 percent probability rate, anticipates a long war. In this case, the Iraqi army puts up heavier resistance than anticipated in the baseline case, resulting in several thousand-coalition casualties. Furthermore, the overthrow of Saddam does not end the fighting as some military units and armed civilians continue to resist through early next year, employing sporadic hit-and-run, guerrilla tactics.
In the last scenario, bearing a two percent probability rate, Iraqi resistance is greater than anticipated and hostilities escalate into a broader regional conflict, inflicting damage on Kuwait, Saudi Arabia and other neighboring countries. The coalition forces suffer many thousand casualties. The US economy experiences another recession and global economic growth slows markedly. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
