Iraq has the second largest oil reserves in the world, behind only Saudi Arabia. With the war in Iraq coming to an end, Iraq's oil industry will soon be operating at pre-war capacity. What effect will this have on the world oil market?

Fareed Mohamedi, chief economist and senior director in the Markets and Countries Group at PFC Energy, will be online Tuesday, April 22, at 2 p.m. ET to answer questions regarding the state of the oil industry.

Submit your questions and comments before or during the discussion.

Mohamedi was previously vice president at Moody's Investors Service and an economist at the Institute of International Finance in the Middle East and Asia departments. Since 1990, he has worked at PFC Energy, where he focuses on national oil companies and the challenges they face.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

washingtonpost.com: Good afternoon All, and welcome to the discussion! Fareed, it's a pleasure to have you with us! Let's begin.

Arlington, Va.: Would you please set forth the basic facts (parties, price, scope and length of contract) concerning the oil exploration rights that France, Russia and China reportedly obtained from Iraq, and explain why the US and Britain did not obtain similar rights? Thank you.

Fareed Mohamedi: The basic facts are pretty difficult to come by because these negotiations were carried out in secret, for obvious reasons and not always finalized. The deals were largly related to the development of already discovered fields. There were 8 major fields -- the most famous being West Qurna and Majnoon -- which were giant fields in the south. Lukoil, a Russian company, negotiated and purportedly had a contract for West Qurna. TotalFinaElf was reportedly negotiating for Majnoon. A final deal was not signed, I believe, because of the prevailing sanctions regime. Several other countries' national oil companies had sought deals with Iraq. These included Vietnam, Algeria and India. The US and British companies did not proceed very far with their negotiations mainly because of the UK and US governments were more proactive in discouraging such negotiations.

Rockville, Md.: Roughly, where does the US get most of its oil? Saudi, Iraq, Russia?

Fareed Mohamedi: The top four suppliers of crude oil to the US are: Canada, Venezuela, Mexico and Saudi Arabia. Imports from Iraq varied widely, typically depending on the level of OIL FOR FOOD (UN Program) exports. With respect to Russia, the US gets small volumes of crude from them; they are actually a bigger player in the Northeast heating oil market supplying the refined product. More broadly speaking, oil supply flows are dictated by market forces than politics.

Mt. Lebanon, Pa.: Assuming completely repaired and fully functional production and delivery capabilities, could Iraqi oil exports --in magnitude-- act as a break on OPEC price swings? I'm an electric power engineer so I'll use one of our metaphors. Could full Iraqi production act as a baseloaded generator - one that delivers a large and fixed output - to hold prices steady throughout the marketplace? Is there any market incentive to build new pipelines to the Mediterranean region? What a marvel for a new Middle East if Iraqi oil could fuel new Israeli and Palesitinian societies. Most of the Iraqi production must be exported by tanker through the Persian Gulf. Doesn't this act as an economic bottleneck so far as Iraqi oil field development is concerned? Thanks much. HLB

Fareed Mohamedi: What is necessary for stability in an oil market is the ability to SWING production. There is plenty of baseload production out there. To continue with your analogy what you need to maintain steady prices is the ability to bring on peak capacity when needed and remove supply when demand is low. There is only country in the world that has been willing to bear the costs of this role and that is Saudi Arabia. It is likely to continue playing a major role in stabilizing oil prices in the future.

Iraq already can export over 1 million b/d through Turkey to the Mediterranean port of Ceyhan. Caspian producers are building pipelines to the MED because it is one of the closest major bodies of water and access through Iran is blocked due to US pressure. Whether you get oil to the MED or the Persian Gulf you can ship as much as you like once you hit a major body of water and if you build sufficient port/storage capacity. Iraq has experienced export problems due to access to the Persian Gulf. That was more an issue of politics and was one of the reasons it had problems with Kuwait in 1990. In the future if appropriate political deals are made and access issues are resolved there is no limit to the amount of oil it could send out through the Persian Gulf. The other Persian Gulf countries already export over 10 million b/d through the Gulf.

Before we get to Iraqi crude exports to Israel/Palestine, that conflict has to be resolved. We do not expect that to happen anytime soon. If that were to happen, it would not require a new pipeline since Iraq already ships oil into the Med.

Washington D.C.: Mr. Mohamedi,
I'm a recent economics graduate and very interested in how oil shapes policy and politics in the Middle East. Do you have any advice for someone starting out in this kind of career? How did you get started, and how can one get involved in studying Middle Eastern oil policy, and then in shaping it?

Fareed Mohamedi: It profoundly shapes the internal politics of the Middle East and their relations with the West. Start your career with an oil company, especially in the business development area, and you will learn those relations on the ground.

Long Beach: I've read reports that Iraq might very well have huge undiscovered oil reserves. What is your read on that?

Fareed Mohamedi: Yes they do. There has been little exploration in most of Iraq.

Long Beach : What grade is Iraqi crude?

Fareed Mohamedi: Medium gravity sour

Long Beach: What is the position of OPEC concerning America taking resources to defray the costs of the American invasion?

Fareed Mohamedi: OPEC does not have a policy on this

Falls Church, Va.: My father worked for Gulf Oil in the 1960s and 70s, so just about all I know about the oil industry is probably outdated. How has the industry changed over the last twenty years?

Fareed Mohamedi: The bulk of the upstream assets moved from being privately controlled to government controlled. It is now in terms of development and production largely a government business. But government's are increasingly strapped for cash. So the pendulum seems to be swinging back with greater access being given to international oil companies.

Long Beach: Will OPEC let an obvious puppet of the United States into their organization as the representative of Iraq's resources?

Fareed Mohamedi: A lot depends on who is in the new government and how it is formed. There will be people and governments who will consider any government in Baghdad a puppet government. But in terms of OPEC policy, I think, the need for maximizing oil revenues will dominate Iraqi and US policy because of the need to reconstruct the country and lighten the burden on the US taxpayer. Thus, the US may become the most "bullish" member of OPEC -- a possible unintended consequence of the invasion.

One other point: I sense from the question that the US is seen as being hostile to OPEC. In reality the US is split on OPEC -- some companies and states like high oil prices and some (in the north, especially during winter) dont. That has always led to the US being ambiguous about the organization expect when prices go to either extreme. On this they are alligned with most sensible OPEC countries, especially Saudi Arabia.

Washington, D.C.: What is your take on the peace protesters saying, "Bush and Blair kill for oil?"

Fareed Mohamedi: I disagree. This was a war for many reasons other than oil -- the US' new global strategy of preemption and sole superiority, the Administration's desire to reshape the Mid East etc. Having said that, I doubt Washington in general would have been interested in the Mid East if not for oil or Israel, the two strategic drivers of our regional policy.

Certainly, the oil companies were not behind the war. They are not unified on anything. They are not all UK and US companies (there are 3000 companies out there). The top five are: ExxonMobil-US, Shell-UK/Dutch, BP-UK, ChevTex-US, and Total French in this order. And, they have spent a long time getting over their interventionist reputations and the last thing they want is to be seen as pushing war for their interests.

Piscataway, N.J.: How can the Shiites, Kurds, Sunni's and Turks get along for the oil economy to succeed in Iraq?

Fareed Mohamedi: Unity will be crucial to form a new and viable government in Iraq. A legitimate government "blessed" by the UN will then lead to the resumption of the oil for food program and to foreign oil companies negotiating deals with Iraq to develop its sector. The extra revenues and investment will be crucial to improving the lot of the people.

However, if the distribution of these revenues is not done fairly as it was not in the previous government you will see enormous divisions in the society. By distribution I dont only mean by region or ethnicity but also by class.

Galveston, Tex.: Those of us in the USA find the concept of "privatizing" the oil industry of Iraq to be a good, maybe even uncontroversial, thing, but to many in the Middle East it brings back memories of what they saw as an uneven relationship with US oil companies through entities like ARAMCO. Will Iraq's oil resources remain in Iraqi hands? Won't even minor steps, like American management of oil, smack of a return to the "one for you, five for me" days of ARAMCO in the Arab world?

Fareed Mohamedi: Currently, the Administration is going to some lengths to not be seen as "grabbing' the oil sector of Iraq. It is trying to look for untainted and authentic individuals possibly from the Iraqi oil sector itself to run the industry. Some of those are loathe to work for the Americans lest they be seen as collaborators. In the end, I think the US will find good technicians who are authentic enough because both sides are desperate to get the industry running again.

This issue of "oil grab" will come up at a later stage after rehabilitation. When the sector is ready to expand and negotiations begin for future development of new fields. Iraqi technocrats recognize the need for foreign investment, technology and training. But they want it under their own control. The Americans want a more open investment environment but if they are seen as pushing for it too heavily and it possibly results in an overweighting of US companies getting in, it could provoke a nationalist backlash despite the confluence of interests. If managed carefully it could run smoothly for both sides.

washingtonpost.com:

That wraps up today's show. Thanks to everyone who joined the discussion.

   |      |