Turkey Invades Iraq

With oil already trading at or near historic highs, the incursion of Turkey into Iraq late Thursday is yet another cloud hovering over the oil market.

While prices Friday dropped to just above $98 per barrel in commodities trading, the threat of violence in Iraqi Kurdistan has in the past led to price spikes.

The Kurdish region, mostly autonomous from Iraq, has huge oil deposits and has remained relatively stable even during periods of extreme violence in other parts of Iraq following the U.S. invasion in 2003. But Turkey, worried about unrest among its own Kurdish population, has repeatedly struck at Kurdish rebels in Iraq in recent months. This invasion, by land troops, is a first.

If oil prices respond, it will be another indication of what we call political peak oil. With supplies around the world tight, and demand high, the threat of violence and other political instability (the Venezuela-Exxon Mobil fight over access to oil there, unrest in Nigeria, etc.) makes the price of oil act as if we've reached a peak oil scenario, when the earth's reserves of oil are being pumped to the maximum extent.

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