Here’s a compelling piece by James Pethokoukis at the Capital Commerce blog on the U.S. News & World Report site.

With oil prices continuing to plunge—and they may have a lot further to go—I’ve started wondering about this “what if” scenario: Where would oil prices be today had we abandoned Iraq to civil war and al Qaeda? What if President Bush had announced on Jan. 10, 2007, that instead of surging U.S. troops under the command of General Patraeus, he was ordering their withdrawal? Imagine if Iraq had descended in complete chaos and terror and genocide. Somalia or Rwanda on the Tigris and Euphrates, I guess.

I agree with Pethokoukis. The prospect of dramatic instability in Iraq and the region would push oil prices well into the stratosphere. Oil is down 20% from its peak and it may fall even further. There are two main reasons for that, Iraqi stability and the Republican drive to drill now. Neither are actually adding oil supply, but the spike in prices was not just about supply and demand. The spike was about the future and investor fears. Calm those fears, even with added supply five years out, and prices drop.