WASHINGTON, March 1: Speculation on possible war in Iraq is not the only factor sending oil prices soaring; analysts stress historically low reserves and a short supply of Venezuelan crude are also behind the surge.

There is no war premium in the market, said Philip Verleger, an oil expert at the Council on Foreign Relations. He said the biggest factor in the high prices is the state of US oil reserves which are at their lowest levels in 28 years.

What has happend is essentially low inventories. Low inventories are keeping larger margins for refineries, and that leads to higher gasoline prices, Verleger added.

Back in 1991, we went to war with oil in our tanks, he added. This situation is different because the stocks are so low and the Energy Department appears unwilling to release any of the Strategic Petroleum Reserve.

The condition of deficit in terms of inventories in industrialised countries is pretty significant. Until there is enough additional supply to get these inventories back up into a normal range, we’re going to see relatively high prices, certainly in the USA, said David Costello of the Energy Information Agency.

In 2002, the average price of a barrel hovered around $26 in New York, and by 2003 that had risen to almost $32, which would be an increase of 24 per cent, he noted, adding there was a general expectation gasoline prices will remain relatively high.

We are assuming the prices will start to come down but probably only gradually until 2004, Costello said.

A good deal of the price increase that occured since November can be related to low inventories in USA and elsewhere and the fact that we lost part of the Venezuelan production, he added.

Venezuelan crude takes just four days to get to US shores compared to 40 days for crude from the Middle East, and the Venezuelan state oil giant PDVSA is a key US supplier. But PDVSA was all but paralysed by a two month general strike, and has not yet reached pre-strike production levels.

He said it was all but impossible to quantify the impact on oil prices of uncertainty surrounding a possible US-led strike against Iraq.

Philipp Gotthelf, president of the consultancy Equidex, said there is also something to be said about the role of OPEC in the price point. It is to their advantage to have the oil prices as high as possible, he noted.

Opec Secretary General Alvaro Silva Calderon has just acknowledged the cartel’s inability to keep prices within a $22-28 a barrel range.

We won’t use oil as a weapon, Calderon told a press conference at Opec headquarters in Vienna Thursday. We manage oil in the economic field, as an economic fact, not as a weapon of war.

Calderon moved to calm concern that a conflict in Iraq would send crude prices higher, saying the organization could raise its current production quota of 24.5 million barrels a day by over 15 per cent in the event of war.

We have around four million barrels per day of spare capacity, Calderon said. We are ready to put this amount on the market if necessary. —AFP