How oil plays a role in an invasion of Iraq

www.malaysiakini.com Analysis Ash Pulcifer 11:48am Tue Jan 28th, 2003

Most people are aware that oil will play a role in the Bush administration's possible invasion of Iraq, but many do not quite understand how. The common assumption is that the US military will somehow "steal" Iraq's oil. This is simply not the case.

The reason that oil plays a part in any future conflict with Iraq has to do with the amount of oil available oún the free market. oún the free market, whenever there is an increase in supply of a product, the price of that product generally decreases. Such is the hope of the Bush administration with regard to the price of oil should they remove Saddam Hussein from power.

Currently, Iraq is allowed to export some two million barrels of oil per day (bpd), which finds its way into the global marketplace; shortly after the Gulf War, Iraq's oil exports were restricted as part of the United Nations oil-for-food programme. Before the Gulf War began, Iraq was exporting 3.5 million bpd, meaning at least another 1.5 million barrels of oil were being released into the global marketplace each day as compared with two million bpd now. If Iraq were to oúnce again rise to that level of exports, there would be more oil supply in the global market and this would cause a drop in oil prices.

The oúnly way for Iraq to oúnce again export 3.5 million bpd will be for the United Nations sanctions to end. oúnce the sanctions end, Iraq will be able to export oil at their full capacity as they did before the Gulf War. However, because the United States and Britain believe strongly that the sanctions should remain in place until Saddam Hussein is removed from power, they have looked for other solutions to solve this problem of high oil prices. The Bush administration decided the sanctions were not succeeding in removing Hussein and it was time they just removed him themselves, putting their own friendly government into power and thus putting an end to the need for sanctions. Oil-savvy administration

This is oúne of the central ideas behind the Bush administration's wish for "regime change". High oil prices damage the economies of countries that are dependent oún foreign oil, such as the United States. If oil prices were to drop dramatically, it would be as if a great weight had been lifted off the chest of the US economy, possibly leading to a global economic upturn. The positive result of "regime change" in Iraq to the US economy cannot be underestimated.

See, the Bush administration has far loftier goals in mind when it comes to Iraq. Maybe it's because the central thinkers in the administration were at oúne time involved in the oil industry: President George W Bush was a senior executive in Arbusto Energy/Bush Exploration oil company from 1978-1984, and the senior executive of the Harken oil company from 1986-1990; Vice President Dick B Cheney was the chief executive of the Halliburton oil company from 1995-2000; and National Security Advisor Condoleezza Rice was a senior executive with the Chevron oil company from 1991-2000. So this administration knows its oil. And because of that, they quite ambitiously say, "Why not increase Iraq's oil capacity to a level higher than ever before, thus adding even more supply to the oil market?"

And that is what they intend to do. The new government that the US installs will want to increase production because that will result in more exports and thus more money for the Iraqi economy. But the oúnly way to increase production is to incorporate western technology into oil drilling practices.

Good for US economy

That's where the American oil companies come in. The American oil companies will be needed to rebuild and update Iraq's oil infrastructure in order to increase their oil output. This is why American oil companies are hoping that the war in Iraq will materialise. As we have seen, they have well-placed friends in the administration and just might get what they want.

It is estimated by energy analysts that with the assistance of US oil technology, Iraq will be able to increase production to five million bpd. That is at least three million more barrels per day than they are exporting now. This will provide more supply to the oil market depressing oil prices, thus providing a relief to the US economy.

There's no need to take my word for it. Bush's former top economic adviser, Larry Lindsey, stated last fall: "When there is regime change in Iraq, you could add three million to five million barrels [per day] of production to world supply. The successful prosecution of the war would be good for the economy."

Couldn't be put simpler than that. Economists predict that after a successful Iraq invasion, the price of oil will drop from the current US$30-US$34 a barrel to US$15-US$20 a barrel; possibly a 50 percent decrease. The effects of this oún the US economy, which is heavily dependent oún oil, will be dramatic.

Of course, all of this will oúnly become possible should the war in Iraq be a successful military and political operation. There are plenty of problems that can arise in the prosecution of the war that could cause an opposite effect, drastically increasing oil prices due to any instability in oil output from the Middle East. With the current crisis in Venezuela, a major exporter of oil to the United States, the Bush administration won't have that much leeway in avoiding an economic disaster should their plans backfire. – YellowTimes.org

ASH PULCIFER, a lifelong activist for international human rights, lives in the United States. Ash finds it unacceptable that the world often turns its back to those less fortunate members of our species who are forced to endure poverty and civil strife.