Published on July 21, 2014

Crisis in Iraq has raised concerns about global oil supply and energy security. The threat to Iraq's sovereignty can have a deep impact on global oil market.

The ISIS has seized control of Syria's largest oil field and Iraq's largest oil refinery in Baiji. These events have had a direct impact on oil prices, which has reached the highest levels since September 2013 at USD116 per barrel.

Iraq owns nearly 9 per cent of the global conventional oil and proven reserves of 150 billion barrels. Oil is the major source of dispute between the government and insurgents.

Iraq has produced nearly 3.5 million barrels per day in this year and is the second highest producer in OPEC, after Saudi Arabia. Iraq plans to increase production to 5 million barrels a day by 2020.

The Middle East is home to 48 per cent of the world's proven reserves of conventional crude oil and produced 33 per cent of annual global production in 2013, which must have resulted in huge returns. In Iraq, for instance, oil extraction cost is USD2 per barrel, while the projected oil prices are above USD100 per barrel.

The major issue between regional security and oil wealth lies in how these revenues are put to use. Stability in Saudi Arabia can only be maintained with the help of a sufficient global oil price and large returns.

Iraq's plant to become a client state of the US has helped transform the oil-rich Middle East. Iraq has desperately tried to maintain control over its national oil companies while auctioning exploration and extraction rights to international firms. US policy of implementing limitations in a world of distributed power. This alternative will help establish links with other states in order to stabilize oil-rich regions.

Many believe that expanding US resources of non-conventional petroleum will help end the dominance of OPEC and fortify US position as the world superpower.