World>Terrorism & Security
posted May 14, 2004, updated 12:30 p.m.

Fighting in Gaza + rising oil prices

While the world focuses on Iraq, the Middle East battles and oil prices soar.

by Jim Bencivenga | csmonitor.com

What might push the Iraq prison-abuse scandal and the horrific images of Nick Berg's beheading by Islamic terrorists off page one this weekend?

Two stories: intense and widespread fighting leading up to the Israeli pullout from Gaza; and the long-term impact of record high oil prices on the US and world economy.


05/13/04 Nick Berg: 'Iraqi police thought I was an Israeli spy' 05/12/04 Revenge for Abu Ghraib abuse? 05/11/04 Comparing Chechnya to Iraq not so simple

Sign up to be notified daily: Find out more.

Pullout from Gaza

There has been no let-up in the Gaza violence since Tuesday when militants blew up an Israeli military vehicle in the Gaza refugee camp of Zeitou, killing six soldiers.

It is "the worst in several years," reports Newsday. A similar attack killed five troops Wednesday in Rafah.

The Israeli army began "razing homes in Rafah refugee camp in the Gaza Strip as details emerged of a government plan to demolish hundreds of houses," the BBC reported.

Armored bulldozers were reported moving row by row in the refugee camp on Friday to "widen a flashpoint corridor Israel controls on the Egypt-Gaza border," Reuters reported.

The intensified fighting is seen as background to the bigger drama created by Prime Minister Ariel Sharon's intent to bring about a complete Israeli withdrawal from Gaza. He is determined that any withdrawal not be seen as a sign of weakness. Palestinian militants are as determined to show withdrawal as a military victory.

Though overshadowed by events in Iraq, the actions did not come as a surprise since Israel had become subject to almost daily attacks from the area since Mr. Sharon announced his intentions of a total pullout from Gaza.

Palestinian militants, after parading and filming the remains of dead soldiers, withheld them, intent on using body parts as barter for Palestinian prisoners held by Israel, reported The Christian Science Monitor on Thursday.

Though the renewed violence unleashes a fresh wave of recrimination, it may not significantly alter the fabric of public opinion. Most Israelis have already made up their minds about whether withdrawing from land in the West Bank and Gaza Strip, occupied by Israel since the 1967 war, is a wise move.

Poll results published in Israel today can only fortify Sharon's resolve, reports USA Today. The poll, published Friday:

...showed a sharp rise in support for Prime Minister Ariel Sharon's plan for a unilateral withdrawal. Voters in Sharon's Likud Party vetoed the proposal earlier this month, although the plan had wide public backing. The Yediot survey of 503 people conducted after the latest violence showed 71% in favor of a pullout, up from 62% on May 4. Opposition slipped to 24% from 32%. The margin of error was 4.4 percentage points.

Given Israeli actions on the ground, and despite his own Likud Party's vote against a Gaza pullout, it appears Sharon is far enough along that there is no turning back from withdrawal. What remains to be seen is how his actions play out in the Arab world, and US presidential politics.

Impact of rising oil prices

Oil prices hit 13-year highs this week in what some analysts describe as a "feeding frenzy" driven by fears of terror attacks in Iraq or Saudi Arabia as well as rising world consumption, reports The Christian Science Monitor:

Behind the rise is the spike in crude oil prices, which this week surpassed the $40 a barrel mark - the highest level in more than 13 years. Production cutbacks by major producers, coupled with recent attacks on oil facilities in Iraq and Saudi Arabia and rising demand from countries like China, are driving the prices.

One way to look at the record oil prices is as a " tax on spending" say Wal Mart executives quoted in Forbes. Higher oil prices are a direct hit to consumers pockets and "take an extra $7 a week" from the average Wal Mart customer, the giant retailer said.

White House economists on the other hand were quick to say that the recent spike in oil prices "will not threaten the economic recovery now underway," reports Forbes.

The Star Tribune cites a report by the Paris based International Energy Agency (IEA), on the threat record energy prices pose to US economic growth" should they continue long term.

The growth in demand for crude continues to outstrip expectations .... Given China's thirst for imported oil and the soaring demand for gasoline and jet fuel in industrialized countries, the agency revised its 2004 demand forecast upward to 80.6 million barrels daily - an increase of 2.5 percent over last year.
...political concerns in the Middle East, bottlenecks in the US gasoline market and an increase in speculative buying of oil futures all have had an effect. Most important, however, has been OPEC's stingy output. By forcing importers to run down their oil inventories, OPEC has been the decisive factor in creating 'a market on steroids,' the IEA said. The agency noted that higher demand for oil is a sign of a rebounding world economy.

With oil producers pumping flat out, where might the world look for excess capacity to dampen prices if the economic recovery continues?

Saudi Arabia, says James Cox in his Friday "Money" column in USA Today. It is "the one nation with a 2 million barrel per day of spare capacity" and the "only cushion for a world that burns through 80 million barrels of oil every 24 hours," says Cox.

He continues:

Prices have hovered near $40 a barrel following a terrorist assault that killed five foreign engineers in the Saudi oil city of Yanbu, as well as a Saudi. The incident fueled skepticism about the kingdom's reliability as a supplier, but doubts about Saudi Arabia have been growing for months.

Cox concludes with three critical questions and offers no clear-cut answers. Simply by posing the questions, he heightens doubts about the wisdom of dependence on Saudi Arabia as the world's oil supplier of last resort.