CNN AMERICAN MORNING WITH PAULA ZAHN
Interview with Daniel Yergin
Aired September 3, 2002 - 08:17 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: A few hours ago in South Africa, Iraq says it will work with the U.N. to allow weapons inspectors back into the country. There were a number of caveats attached to that statement. At the same time, though, President Saddam Hussein says America's war talk has less to do with inspections and more to do with oil.
Quoted by the Iraqi News Agency, the president says, I'm quoting now, "America believes that if it destroyed Iraq, it would control oil in the Middle East."
How, then, would a war with Iraq impact world oil supplies?
Daniel Yergin is a former U.S. Department of Energy official, now chairman of the Cambridge Energy Research Associates, and is live in D.C.
Good to have you with us. Good morning to you.
DANIEL YERGIN, CAMBRIDGE ENERGY RESEARCH ASSOCIATES: Thank you.
HEMMER: You don't think a war on Iraq would have much impact with us Americans here at the pump. Why not?
YERGIN: Well, it's already having some impact. There's a kind of fear premium in the price of oil, $3 to $5 a barrel, maybe $0.07 to $0.10 at the pump. But the key thing is that Iraq, while it's got very large oil reserves, has marginalized itself as an oil exporter and these days its exports are only about one tenth that of neighboring Saudi Arabia.
HEMMER: What about this, then, sir, why is it that 30 bucks a barrel right now -- some say it could go to the mid-30s possibly -- is that driven out of fear, uncertainty or what?
YERGIN: Well, there's no question that the oil market is already jittery about what's going to happen. It's unsure. If a war started, the oil price probably would go up, as you said, maybe $5, $6 a barrel until you saw other oil from the extra supplies that are available elsewhere coming into the world, into the market.
So as long as it's Iraqi exports that are disrupted, it's very manageable.
HEMMER: If, then, Iraq has been marginalized on the world market, where is the makeup of sorts for that oil supply? What does the rest of the Arab world do and react? YERGIN: The bulk of extra supplies that could be put into the market come from two places. One, they come from other Persian Gulf suppliers, of which Saudi Arabia is at the top of the list. The other are the strategic, so-called strategic stocks that the United States and the other Western industrial countries have, which could put in as much as four million barrels a day of oil into the market pretty quickly.
So those are the two replacement sources.
HEMMER: What about this, then, what if, indeed, there is a war? How much do you, how much do you sit back and measure how the rest of the Arab world will react in its own oil supply that will ultimately determine the true impact on world markets?
YERGIN: Well, of course that is one of the big questions. The other is whether a war spreads or not. Saudi Arabia just yesterday said its commitment to stability in the oil market. I think the producers, for the most part, don't want to see prices skyrocket because that will only create problems for them down the road and would also be a, you know, would be a very serious shock for a world economy that can't afford serious shocks right now.
HEMMER: And I think the other thing, really, is the relationship with Saudi Arabia. And if you go back to Crawford, Texas last week, making sure the ally of Saudi Arabia and the relationship with the U.S. continues intact and continues with a sense of strength. How much of that do you think was part of the discussions last week in Texas?
YERGIN: Oh, I assume that it would have been an important part of it, that the Saudis have continually said they want stability in the oil market and obviously oil would have been one of the topics on discussion at the meeting like that.
HEMMER: Daniel Yergin in D.C., thank you, sir.
YERGIN: Thank you.
HEMMER: Good to have you with us today on AMERICAN MORNING.
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