Wednesday, May 04, 2005
America's U-Turn on Iraq's Oil Policy
In an interesting article over at Harpers, Greg Palast confirms my suspicion on why Iraq is still a part of OPEC (which plays a key role in increasing oil prices that is estimated to have cost US 1.2% of its GDP - around a fourth of its total growth), its system of oil production is still along the lines originally laid out by Saddam Hussein and the neoconservatives who initially favored privatizing Iraq's oil are conspicously silent: Corporate Lobbying .
The initial idea, articulated by Cohen in "The Road to Economic Prosperity for a Post-Saddam Iraq", was to break up Iraq's oil fields and sell it to competing operators, who he argues would then raise production beyond Iraq's current quota (3.96 million barrels a day). This extra crude (estimated at 6 million barrels a day), the argument goes, would floor oil prices especially as OPEC would break down. This, by the way, would end Saudi Arabia's political and economic clout. Infact, this argument was part of the offcial policy by February 2003!
Of course, the US oil industry, which recently has - thanks to the high price of oil - posted very high profits, wouldn't want this. After all, IOC's (International Oil Companies, who typically operate on state owned assets) interests are not too far from OPEC's. It is then not suprising then that the industry has played a role in Iraq's unchanged oil policy.
A question that Palast does not consider is why, in the scenario of privatization, wouldn't the companies simply collude and act like Iraq already does? In other words, all that would change would be replacing Iraq by a coalition (had to use that!) of oil companies. Perhaps the security problems with maintaining these oil assets doesn't make this an attractive alternative to the oil industry.
Incidentally, Palast also has a book on similar theme. The title says it all: The Best Democracy Money Can Buy: The Truth About Corporate Cons, Globalization and High-Finance Fraudsters.
The initial idea, articulated by Cohen in "The Road to Economic Prosperity for a Post-Saddam Iraq", was to break up Iraq's oil fields and sell it to competing operators, who he argues would then raise production beyond Iraq's current quota (3.96 million barrels a day). This extra crude (estimated at 6 million barrels a day), the argument goes, would floor oil prices especially as OPEC would break down. This, by the way, would end Saudi Arabia's political and economic clout. Infact, this argument was part of the offcial policy by February 2003!
Of course, the US oil industry, which recently has - thanks to the high price of oil - posted very high profits, wouldn't want this. After all, IOC's (International Oil Companies, who typically operate on state owned assets) interests are not too far from OPEC's. It is then not suprising then that the industry has played a role in Iraq's unchanged oil policy.
A question that Palast does not consider is why, in the scenario of privatization, wouldn't the companies simply collude and act like Iraq already does? In other words, all that would change would be replacing Iraq by a coalition (had to use that!) of oil companies. Perhaps the security problems with maintaining these oil assets doesn't make this an attractive alternative to the oil industry.
Incidentally, Palast also has a book on similar theme. The title says it all: The Best Democracy Money Can Buy: The Truth About Corporate Cons, Globalization and High-Finance Fraudsters.
