Max Fisher examines the economic angle of ISIS’s machinations in Syria and Iraq:
There is reason to be skeptical that ISIS can really re-start eastern Syria or northern Iraq’s oil fields, much less move and sell the oil, but the fact that the group has this ambition at all is telling. As the chaos of Syria’s war breaks apart the state and its ability to function economically, ISIS is moving in to replace the state and its tax collectors, then using that revenue to launch its invasion of northern Iraq, which just so happens to be rich in oil itself. …
This money goes a long way: it pays better salaries than moderate Syrian rebels or the Syrian and Iraqi professional militaries, both of which have suffered mass desertions. ISIS also appears to enjoy better internal cohesion than any of its state or non-state enemies, at least for the moment. It rules over an area the size of Belgium.
The conflict is likely to drive up already high oil prices, it but won’t necessarily result in a major market disruption:
So far, the only oil-related casualty of the fighting has been the pipeline that runs from Kirkuk to Ceyhan in Turkey. The pipeline, which has been out of commission since March because of sabotage, was expected to be repaired and back online and carrying up to 250,000 barrels a day.
That might remain the only petroleum casualty. Iraq’s biggest oil fields are far to the south, closer to Basra than to Baghdad. The Islamic State of Iraq and Syria (ISIS) forces are modest in size, and any attempt to reach the south might stretch their supply lines and put them up against tougher foes. The 2.5 million barrels a day exported via terminals and tankers in the Persian Gulf seem relatively secure.
But ISIS is hardly the only reason oil supplies are on the rise:
[S]tarting in 2011, the disruptions often began to exceed 2 million barrels a day. Among the culprits were the Arab Spring and follow-on uprisings, the chaos in Nigeria, Iran sanctions and of course Russia president Vladimir Putin’s crypto-invasion of Ukraine.
Then last July, Libyan militants stormed oil export facilities and shut them down. As of now, the country pumps just one-eighth of the 1.6 million barrels of oil a day it produced before Muammar Qadhafi’s ouster in 2011. All in all, about 3.5 million barrels of oil a day have been off the market around the world since last fall. Those barrels have offset a 1.8 million-barrel-a-day surge of supply from the US.