Oil Price Surges amid Iraq Turmoil

Sectarian conflict in Iraq is a potential body blow to global oil companies which have invested tens of billions of dollars in the country's once moribund industry.

After decades of war and neglect during Saddam's dictatorship, massive investment by the likes of ExxonMobil, BP, Shell, Lukoil, Kuwait Energy and China National Petroleum Corporation (CNPC), Iraq meant the hydrocarbons sector was thriving: Rumaila pumping 1.3 million barrels a day, West Qurna 1, 500,000 barrels a day and Al Majnoon was set to double output from around 200,000 barrels a day.

Companies like Shell had also cleared minefields, dredged a river to provide a new dock and built homes, schools and highways in southern Iraq.

Longer term, nervous oil companies are now going to be wary of investing in Iraq.

Outside of Iraq a sharp rise in the price of oil will impact the world economy, not least the airlines which already exists on paper-thin margins.

Last week's news from Iraq sent a shudder through the airline and travel world; by last Friday and British Airways' parent International Airlines Group was down 10% on the week, the UK's Thomas Cook down 11%.

John Cookson has been reporting from Iraq for 25 years for international news channels including Al Jazeera English and Sky News.  Twitter: @Newsman1000

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