Oil Could Reach 80 US Dollars Barrel In Extended War: Forecast
Wellington (dpa) - The price of oil could reach 80 U.S. dollars a barrel - four times the long-term average - in the worst case scenario of an extended war spreading outside Iraq, the New Zealand Treasury predicted in a report released on Thursday.
The most immediate impact of a war in Iraq would be a rise in the oil price to about 40 U.S. dollars a barrel, as happened during the 1990 Gulf War, Treasury officials told Finance Minister Michael Cullen.
But this could double for a period of time in a prolonged war spreading outside Iraq, the officials said.
They said a short war of less than six weeks would have only a ``modest'' impact on global growth, lasting for about six months.
But a long war where the United States and its allies became bogged down or conflict spreads beyond Iraq would hit confidence, increase unemployment and make a global recession a ``distinct possibility'', the officials said.
New Zealand's tourist industry, which hosts about 2 million visitors a year, would be hardest by war ``due to aversion to long-distance travel, especially from the United States and Japan'', the report said.
Early Thursday, crude oil rose as much as 2.6 per cent to its highest price since Iraq occupied Kuwait in 1990, the Bloomberg financial news agency reported.
Oil rose in New York late the previous day after the U.S. Energy Department said oil inventories last week fell to the third-lowest level in at least 19 years.
Crude oil for April delivery rose to 38.66 dollars a barrel in after-hours electronic trading on the New York Mercantile Exchange, and the contract traded at 38.30 dollars at 11:06 a.m. Tokyo time.
``The supply situation in the U.S. and parts of Asia is very, very dangerous,'' Tetsu Emori of Mitsui Bussan Futures Ltd. told Bloomberg.
``It's easy for crude oil prices to reach 45 to 50 dollars'' per barrel once a war starts in Iraq, he reportedly said.