(MONEY Magazine) – This past year it wasn't just the stock market taking us for a wild ride. As we moved closer to war with Iraq, oil prices jumped from $20 to nearly $40 a barrel. By late March they'd fallen to about $28. To find out where we go from here, MONEY's Cybele Weisser caught up with Pulitzer prize-winner and oil market guru Daniel Yergin, chairman of Cambridge Energy Research Associates, whose new book about globalization, Commanding Heights, has been made into a PBS series.

Q. With oil prices so volatile, what's your forecast for the next six months?

A. The scenario that we're using is $27 to $28 a barrel, assuming some disruption of the Iraqi oil industry and a swift postwar reduction in OPEC output. Our downside case is $21 to $22, which would result from continued high levels of OPEC production and a weak global economy.

Q. At the start of the 1991 Gulf War, oil prices fell 50% in one day. If we succeed in Iraq, will we see a similar drop?

A. Probably not that much. The 1991 supply disruption could just about be made up with alternative sources of production. In 2003 the market was tight ahead of the war because of turmoil in Venezuela, unusually cold weather and OPEC's reluctance to step up production quickly.

Since the war began, OPEC's increased production has come onto the market and Venezuela is back at about two-thirds its normal output. Now there is increased political instability in Nigeria. Also, there's a misconception that there will be a big surge of new production capacity in Iraq [after the war]. One former Iraqi oil minister told me recently that production might go down at first because of the requirements of rehabilitation. The Iraqi oil industry is in a state of dilapidation. We estimate that it will cost $5 billion and take a couple of years to rehabilitate the oilfields. Then the task is to develop newly identified fields.

Q. Will this benefit companies like ExxonMobil and BP, or oil services firms like Halliburton?

A. The new government in Iraq will be eager to start negotiating. But companies won't start writing checks until things are stabilized. Oil services companies, however, will see an immediate need for their expertise.

Q. How key is Iraqi oil for the U.S.?

A. The U.S. is not dependent on any one country in the Persian Gulf as a source of oil. We get 70% from the Americas; another 20% comes from West Africa and the NORTH SEA. The rest of the world, particularly the growing Asian market, is very dependent on the Persian Gulf.

Q. Can the U.S. better protect itself from supply disruptions?

A. I like the quote from Churchill, who converted the British navy from coal to oil on the eve of the First World War: "Safety and certainty in oil lie in variety, and variety alone." There have been some big changes in the past decade. One is the emergence of Russia, where oil production increased 25% over the past three years. And West Africa has seen significant discoveries. We're also seeing a technology revolution in exploration and production that is effectively creating 125 billion barrels of new reserves over the next five years--more than Iraq's proven reserves. Last year we had the first major increase in worldwide oil reserves since the 1980s.