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What would truly be a nightma- and fuel taxes are major com- physical limits and new capaci-
re for our quickly globalizing ponents of national budgets in ty cannot be added quickly. The
world economy? Most likely, almost all countries. Crude pri- International Ener@y %ency
ces crossed $42 a barrel in and Western governments
successful terrorist attacks on
May 2004. If terrorists des- have large stockpiles for emer-
major Saudi oil fields that send
troyed a major Saudi oil field, @encies but cannot cope with
crude oil prices through the
crude prices could hit $80 - prolonged shomalls.
roof. Thatwould greatly impove-
$100 or more.
rish the developin@ world, des- The US Department of Energy
tahilize world trade and finan- The West would be particularly estimates that current global
cial systems, and possibly trig- hurt. Governments would be spare capacity for producing oil
ger an economic recession. forced to raise interest rates to is at the lowest level in 30
Serious, perhaps irretrievable, control inflation. They may also years. Iraq is the Gulfs second
damage would occur to global be forced to reduce oil taxes to oil power after Saudi Arabia but
peace, security and prosperity. bring down gasoline and fuel is in so position to help.
Emboldened by success, terro- prices for angry consumers. Such concerns underlie
rists might conduct more bloo- Lower tax revenues would America's controversial
dy attacks against innocent make expensive social wel(are attempts to establish a pro-
civilians to overthrow govern- and other public services West government in Iraq. It
ments and seize politica unsustainable, greatly reducing fears that disruption of oil sup-
power. Western quality of life. plies caused by terrorists could
This is not far-fetched. At mee- Production capacity may be res- bring the entire world economy
tored in a year but the econo-
tin's in late May 2004, OPEC to its knees. A chaotic Iraq that
confessed its inability to increa- mic damage will take much Ion- becomes an incubator of trai-
ger to repair.
se oil output sufficiently to ned terrorists scarcely bears

reduce oil prices. That is bad Why would destroying a major thinking about.
Saudi oilfield be so hurtful?
news for jobs and livin@ stan-
Because the Saudis alone have
dards around the world. At the
Moving (orward in
same time, America is flounde- enough surplus capacity to put
ring in its war against global ter- more oil on the market each insecurity and risk
rorism. time prices rise too sharply. Gulf countries, including Saudi
The increased supply brings pri-
Arabia, Kuwait, the United Arab
Remember, oil is vital not only ces back into a politically Emirates, Iran and Iraq have
as an input into almost all acceptable range of $25-$33 about 70 percent of the world's
aspects of economic life but per barrel. Althou@h the Saudis known oil reserves. Russian oi

also as a source of tax reve- are sitting on 25% of world is simply no substitute for
nueS. qt 70%- 80%, gasol!ne crude oil reserves, they are Saudi oil because extraction is
already pumping close to their
18 Diva 7.2004