It'll be business as usual Wednesday for the U.S. economy when power is handed over to the new Iraqi government, local experts say.

But what will happen in the long run to the economy - and gas prices in particular - are a bit less clear.

"In the long run, it depends on whether they can have an honest government. It's as simple as that," said
Frederic Murphy, a professor in The Fox School of Business and Management at Temple University. "If they do that, then they and the world will be better off. (If they don't), more chaos."

"The transfer of power? Gosh, who knows?" said Timothy Considine, a professor of natural resource economics at Penn State University. "It's a military thing. If someone blows up an oil pipeline, you're going to see higher prices. The market has almost become accustomed to these continual threats of supply."

Iraq produces about 2.2 million barrels of oil a day and exports 1.7 million barrels, according to the CIA's World Fact Book.

"There were expectations that Iraq would be a bonanza for oil," Considine said. "They are exporting at or above pre-war levels now, with disruptions due to attacks and so on. But a lot of their fields are damaged. They will not within the short- or even medium-term lead to a very substantial increase in production. It's really not going to relieve pressure on world oil markets."

Still, a little instability can go a long way to drive up prices, as companies look ahead to the uncertain future.

"They're a real small player, but at the margin you have, one small player going out could have an impact," he said. "A million-barrels-per-day swing can swing prices $5 to $10 a barrel."

The U.S. consumes about 19 million barrels a day, importing more than half of them from oil-producing countries around the world, including Iraq.

"They're really getting little out of Iraq right now," said Ross Di Bono, executive director of the Pennsylvania Gasoline Retailer's Association. "That refinery is such a mess. That's been one of the disappointments - since Saddam has been out of there, that refinery is not better off today than it was two years ago."

Gasoline retailers have seen no shortage of supply, Di Bono said.

Gas prices have dipped in recent weeks to under $2 a gallon. The world's rising oil prices have been fueled by the growing economies in China and India, and the seasonal demand for gasoline, experts said.

"It's just a question of volatility," Murphy said. "There's going to be a lot of volatility in the oil market. The oil companies over the years have been drastically reducing their crude oil inventories, because they've become much better at managing their inventories and their product.

What's needed now is to have a little bit of breathing room, and manage some of the strategic petroleum reserve."

- Reprinted with permission, Bucks County Courier Times