November 2, 2007

Another week, another record surge in oil prices as the benchmark for a barrel of crude rose above $95.

The recent surge led me to the annual Oil & Money conference, a fixture in London for the last 27 years. Two things struck me at this year’s gathering. Number one, the gains of $3 to $7 a barrel a week surprise even the most seasoned observer. The other surprise was one of those unexpected encounters on the road as a journalist.

I call it the “perfect storm” in the energy markets, where a confluence of events hit at the same time to push prices higher and higher. Despite the U.S. Federal Reserve cutting interest rates again to counter a drop in demand and concerns over a credit crisis, other countries in the world continue to see explosive growth and therefore more demand for energy. Top of the list of fast-growing stars: India and China.

The other two fronts of the storm are a falling dollar (oil is priced in dollars) and continued tensions in the Middle East, linked to Iran and problems on the border between Iraq and Turkey. In sum, these factors combined make the job pretty simple for the current and former oil ministers, analysts and consultants who meet every year to make their predictions.

I sat down with the former Iraqi oil minister, Issam Al-Chalabi who had a lot to share about today’s market and the country he left behind shortly after the invasion by Saddam Hussein of Kuwait in August 1990. The ex-minister is a trained mechanical engineer educated at University College London and a respected consultant in the energy business.

His biggest concern now is not the rising tensions between Iraq and Turkey, but between Iran and the United States. Al-Chalabi seems to take the view that a military strike on Iranian facilities and retaliation by Tehran are a real possibility and could jeopardize the flow of oil out of the Arabian Gulf. In that case, he said in a matter of fact tone, “don’t be surprised if you get $150 or even $200 a barrel.” That is saying something. Don’t forget he lived through the eight-year war between Iraq and Iran.

What perhaps may be more interesting and to be continued over a coffee “another time” is what wasn’t said during our first encounter in 17 years. What was it like reporting to Saddam Hussein, when did you decide your time in government was up and where have you been since 1990?