(from the Energy Information Agency)
Iraq's oil production has been sadly constrained by the several wars it has been a party to in the last 25 years, first against Iran, then against the rest of the world after the Kuwait invasion, and more recently the US invasion.
Each time, oil production dropped. The last war is no different, and production shows for the time being no sign of getting back on track:
The difference between this war and the previous ones is that, this time, it coincided with an abrupt growth in China's imports for oil at a time when Saudi Arabia did not have any spare capacity to help respond to that demand.
Thus oil prices rose (pretty much in line with Chinese exports):
Which means that while the USA was spending $250bn and counting, this tense situation on the oil markets, created among others by the disappearance of 1.5mbd of Iraqi oil, provided massive windfalls to other oil exporters:
And what are the oil exporters doing with these surpluses?
Buying European goods and American paper:
So, to sum up the US actions in Iraq re oil:
- Iraqi oil is cut in half, and taken off the market;
- prices shoot up
- oil exporters like Russia and Saudi Arabia get rich
- they buy European stuff
- they buy US debt and assets
- the US then uses the money loaned by oil producers to buy Chinese goods (which fuels Chinese oil demand)
Imagine if the $250 bn spent in Iraq had been used otherwise:
- let's dream, with an energy focus - to build alternative energy capacity at home;
- let's dream, with a security focus - in a grand deal with Russia, and others, to get the world totally rid of nuclear weapons and material, with strict controls and compensation paid to all nuclear users;
- let's be modest: to simply not dig the budget deficit and the debt and make enemies all over the planet.
- let's be cynical: give half to ExxonMobil and Halliburton and co - it would still be more than they are getting now, with less "collateral damages"
But no, the rest of the world is pissed off, richer, and the oil situation has only gotten worse. Nice job.
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