In a positive step for U.S.-Iraq relations, the two countries have reached a deal in which the United States will sell Iraq unmanned aerial drones and other military equipment. Iraq’s navy will use the drones to protect its oil reserves within the country’s territory in the Persian Gulf.

The U.S. Office of Security Cooperation-Iraq, headed by Gen. Robert Caslen, hopes that this sale will enable Iraq to be a dependable source of oil, a valuable asset given the recent sanctions on neighboring Iran. A steady outflow of oil should lessen the pressure on oil prices both in the United States and in Europe. The sale of the drones was confirmed by the office but no other details were provided.

Iraqi oil must travel through a number of straits and passageways that are susceptible to terror and other criminal activities or acts of war. Iran has threatened to blockade the area in the past. Ali al-Moussawi, an adviser to the Iraqi prime minister, believes that “Iraq should have the ability to protect itself against outside aggression.”

Iraq has stated that it is not concerned whether or not Iran will view the move as a threat. The drones will enable Iraq to keep 24 hour surveillance of its precious resources. Iraq is currently training engineers to man the drones and plans to be ready to use the drones late this year.

Gen. Caslen has said that “They understand the importance of the mission to protect its oil platforms.”Iraq has been responsible for securing the oil reserves since 2005, but had the help of the United States until American troops withdrew in late 2011.

Since the U.S. pulled out of Iraq, the OPEC country has increased its oil production to 3 million barrels a day from about 2.5 million barrels a day. Its oil industry was previously crippled due to long wars and harsh sanctions against ousted dictator Saddam Hussein. Iraq’s deputy prime minister for energy, Hussain al-Shahristani, estimates that production will grow to 10 million barrels per day within the decade. Iraq has the world’s fourth largest oil reserve infrastructure.

The sale of the drones is meant to strengthen U.S.-Iraqi relations. The ties have been in a fragile state since the United States entered Iraq in 2003. Iraq has already agreed to purchase more than $15 billion worth of American military equipment, including F-16 fighter jets, tanks, and armored personnel carriers. Iraq maintains that all of its purchases are to be used for defensive purposes.

Image Courtesy of Anton Hlushchenko / Shutterstock.com

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Continuing unrest in Libya as well as other North African and Middle Eastern countries has led to the highest crude oil prices since 2008, the U.S. Engery Information Administration (EIA) reported March 8.

In correlation to the disturbance of crude oil exports in countries such as Libya, West Texas Intermediate (WTI) and other crude oil benchmarks have risen around $15 per barrel since mid-February— $14 higher than previously predicted— allowing  an estimation of $105 per barrel of crude oil to refiners in 2011.

Acceleration of spot crude and gasoline prices has begun to affect consumers in retail environments.  Increases in pump prices will continue to rise through the spring due to delayed relay between crude oil and gasoline.

Motorists can expect regular-grade gasoline to average around $3.56 per gallon, 77 cents higher than the 2010 average, and 40 cents higher than initially predicted for 2011. However, during the peak driving season, (April through September) EIA predicts drivers will pay $3.70 per gallon, considering regional disparity.

Significant uncertainty within the current market has led analysts to predict there is a 25 percent chance that the national average for gas prices this summer could exceed $4.00 per gallon. This may be due not only to rising crude oil prices, but higher refining margins as well.

As long as world oil markets tighten and unrest persists throughout North Africa and the Middle East—the world’s largest oil producers—uncertainty in the oil market will remain.  If instability in the Eastern Hemisphere continues to spread, there will be adverse side effects for the oil market.

Auto Manufacturers such as Chevrolet and Toyota have been strategically reaping the ambiguity facing crude oil.

Although Tesla Motors is given credit with creating the first purely electric car, the roadster (est. 2008; msrp 109,999 and model s (expected to be released in 2012 with a base price of 49,900), Chevrolet and Toyota are making gas and emission free cars more available to middle income families.

Introduced in October 2011, the Chevy Volt is an electric car which uses gas to create its own electricity for up to 40 hours of drive time. Even if the driver is unable to recharge the car, Volt will use a generator which produces several hundreds of miles on a single tank of gas.

Toyota, maker of the hybrid Prius, is expected to release a plug-in version of the popular car in the beginning of 2012.  Recently, they and several other companies such as GE and Schneider Electric have begun manufacturing at-home electric car chargers.

The expansion and increase of residential conveniences toward green cars questions when gas powered vehicles will become obsolete. As emission free technology broadens, techniques for finding and extracting oil will as well.

The development of electricity as an alternative dominate energy source seems plausible, but is the world prepared to move away from the internal combustion engine?

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