World Oil Market Chronology From 2003 - 2003

2003

United States crude oil prices averaged $30 a barrel in 2003 due to political instability within various oil producing nations. It rose 19% from the average in 2002. The 2003 invasion of Iraq marked a significant event for oil markets because Iraq contains a large amount of global oil reserves. The conflict coincided with an increase in global demand for petroleum, but it also reduced Iraq's current oil production and has been blamed for increasing oil prices. However, oil company CEO Matthew Simmons emphasizes the peaking and decline of oil-exporting in Mexico, Indonesia and the United Kingdom is the reason for the price gouging. According to Simmons, isolated events, such as the Iraq war, affect short-term prices but do not determine a long-term trend. Simmons cites the use of enhanced oil recovery techniques in large fields such as Mexico's Cantarell, which maintained production for a few years until it eventually declined. Pumping oil out of Iraq may reduce petroleum prices in the short term, but will be unable to perpetually lower the price. From Simmons' point of view, the invasion of Iraq is associated with the start of long-term increase in oil prices, but it may mitigate the decline in oil production by retaining a partial amount of Iraq's oil reserves. As a direct consequence, the oil production capacity was diminished to 2 million barrels (320,000 m3) per day.