Iraq Oil Spike May Spark Global Economic Risk: Bern

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June 19 (Bloomberg) -- Gianna Bern, founding principal at Brookshire Advisory and Research, discusses the run up in oil prices due to the violent unrest in Iraq and how it may impact global economies. She speaks with Betty Liu on “In The Loop.”

All be concerned.

As you just mentioned, iraq now has becomeopec's second-largest producer of crude.

It has been a remarkable story for them that they now produce about 8.3 million barrels per day.

That means as the second-largest producer, they are vulnerable to supply shocks.

They are and we have seen the fighting around some of the biggest oil production projects in iraq and that has been the reason why we have seen oil prices, particularly brent, rise.

The president has said that if there are disruptions in iraq and other opec countries could make up for that disruption.

Could they?

Well, they are -- the only country that can make up any production would be the saudi's. there is not any other country that can really step up to the plate in a fashion.

Even the saudi's, it becomes a question of how much could they supply if there was a prolonged production interruption in iraq.

I don't think the saudi's have a whole lot of spare capacity either.

This is something -- if there are any risks to this scenario, i see a fragile global economic recovery.

In the u.s. and europe and china , it has been lackluster so certainly increased energy prices are a risk on the horizon.

So far, they have been rising gradually.

We have seen some spikes.

At what point will it become a shock to the global economy?

Right now, if we see crude oil prices and i meanbrent - if brent prices rise to 120 dollars per barrel range, i think there are risks to global economic recovery.

We don't have to think too far back to 2008 when we saw prices spike up to $147 per barrel in the most immediate impact will be in the transport sector.

This is airlines, railroad, truck transport.

It becomes a question of higher energy prices impacting their cost structure.

Or investors, it becomes a question of those are some stocks to watch because their cost structure could potentially be impacted with the conflict we see now in iraq.

What do you make of the widening spread?

There is a widening spread between brent and wti crude.

This is something else for investors to keep on the radar.

I would continue to see a widening spread between brent and wti.

The brent trade is more susceptible to the increased geopolitical risks, if you will.

Wti less so and right now, the spread is -- has widened to its widest part of the curve we have seen in many months.

It's all driven by the impact of this potential conflict in the middle east.

Thank you so much for joining us.

Coming up, u.s. trade representative michael froman joins us on the fate of the export import bank.

We will talk about the chances of congress reauthorizing exim bank.

You cannot pre-order the j.k. rowling bestseller but apple has jumped into take advantage.

We got much more coming up.

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