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True, but:

1. Iraq has oil - a lot of oil.

Iraq: Oil and Economy

Iraq's Oil Reserves: Untapped Potential
While its proven oil reserves of 112 billion barrels ranks Iraq second in the work behind Saudi Arabia, EIA estimates that up to 90-percent of the county remains unexplored due to years of wars and sanctions. Unexplored regions of Iraq could yield an additional 100 billion barrels. Iraq's oil production costs are among the lowest in the world. However, only about 2,000 wells have been drilled in Iraq, compared to about 1 million wells in Texas alone.

That's only a few years. But consider where gas prices were a few years ago. That's a good first approximation of the difference that would have been possible without sanctions and two insane wars. There are all kinds of maybes hanging off that - e.g. an Iraq/Iran war could have pushed prices up even further, without US involvement. But assuming relatively stability, I'd guess that putting Iraqi oil on the market at full extraction levels would slash the price by at least a third.

  1. The Iran factor. I'm not sure if people are buying just in case, or not buying because it makes no difference. But prices go up every time sabres are rattled. Without Iraq, there would be no credible threat to Iran, so we could lose maybe 20% off the current price just from the Iran factor - which is being played up by both parties, because Iran always profits when prices increase.

  2. Speculation is the great unknown. There's as much evidence for political manipulation as there is for profiteering, but I don't think the difference is going to be more than another 20% or so.

Adding those together gives a no-Iraq price of $2 or less.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jul 12th, 2008 at 07:04:16 PM EST
[ Parent ]
  1. Iraqi oil production now is slightly above pre-war levels (stable since December). Under the status quo, then, supply would not have increased much due to continued sanctions against the regime.

  2. As possible counterpoints: With no war in Iraq, the US would have far greater capacity to mount a war against Iran. The American public would also have learned fewer lessons about the limits of US military power.

I think the major factor you'd have while holding as many conditions constant as possible would be the risk premium in the market related to Iraqi production, and the decline of the dollar. The Iraq war has cost around 540 billion US dollars, to date (ticker 1, ticker 2). The foregone revenue of Bush' tax cuts, by comparison, would be around 1.6 trillion US dollars (cbpp, rough projection on my part).

So, the war has clearly been significant in terms of its requirements for the money press.

by nanne (zwaerdenmaecker@gmail.com) on Sat Jul 12th, 2008 at 08:03:19 PM EST
[ Parent ]
I was assuming free flow without sanctions. A cynic might wonder if the point of limiting Iraqi access to the oil market through sanctions was as much about keeping prices high as punishing Saddam. The Saudis and the Bush family used to have close links, and probably still do, although I suspect the Bin Ladens and other Saudis have always been smart enough to see Clan Bush as useful idiots.

Either way, I doubt the Saudis are desperately unhappy about current price levels. But they were clearly unhappy about sharing power with an independent like Saddam.

I think an all-out invasion of Iran was always going to be less likely than an attack on Iraq, so I'm not convinced that Iran was ever a realistic alternative.

But I think it's worrying that people are arguing as if these wars were inevitable. Perhaps they were eventually, and acceptance of a Gore win in 2000 would only have postponed them. But the alternative was - and is - a crash Green development program, which wouldn't just lower gas prices but make them much less relevant to everyone. Gore might or might not have achieved that in a term. But we'd certainly be much closer to it than we are now.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jul 12th, 2008 at 08:21:58 PM EST
[ Parent ]


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