All about oil?

Biffa Bacon

Iraqi oil is not America's objective

It's been repeated so many times by the anti-war crowd but is anyone actually able to substantiate the allegation that the coming liberation of Iraq is all about oil?

Or is it just mindless repetition of Marxist propaganda?

mike65

I never thought this was about oil per se, its more about a more compliant
middle-east and gittin Saddam.

Mike.

Victor

At a current price of $25 a barrel (above the long-term price of oil and well above even the current price for Iraqi crude), these reserves appear to some analysts to be worth about $3,400bn - surely an attractive asset.

A cost of Iraqi oil production or replacement of as little as $10 a barrel lowers the market value of Iraq's reserves to about $140bn.

Using some not very clever accounting he jumps from a value of $3,400bn to $140bn, purely to suit himself. This is where he goes wrong. If the oil is still in the ground and can be extracted, it is worth money.

A cost of Iraqi oil production or replacement of as little as $10 a barrel lowers the market value of Iraq's reserves to about $140bn.

The recent acticle that was commented on here indicated Iraq could produce for as little as $1 per barrel.

Assuming a cost of capital for the US of about 10 per cent,

How is the cost of capital 10% when intrest rates in the US are something like 2%?

DadaKopf

It's not just about oil. It's about money. It's about business interests. It's about extending and 'stabilising' US/Western interests throughout the region. It's about creating a market borne strategically from sanctions and legitimated as 'structural adjustment packages'. It's about legally placing more US military in the region to secure US business interests. It's about introducing 'democratic reform' so that Iraq will be made comply with neo-liberal economics. It's about a plan to bypass OPEC's control of the oil through the exploitation of the oil-for-food programme. It's about keeping China weak. It's about US domestic politics and the consolidation of traditional bases of Republican support in preparation for the next election.

It's not about global terrorism. It's not about political Islam, or Al Quaida, or Osama bin Laden. It's not about human rights (I wish it was).

Meh

Originally posted by mike65
I never thought this was about oil per se, its more about a more compliant
middle-east

And why exactly is a stable, compliant, prosperous Middle East important to the US (and the world in general)? Because the Middle East is full of oil.

I'm not one of those people who believe that Bush is just trying to grab Iraq's oil wells by installing a US puppet régime -- it would be far cheaper just to buy Iraqi oil on the open market, as the FT article linked to above points out. I believe that Bush's motivation is about ensuring long-term stability in the Middle East (the biggest oil producing region in the world) by removing a tyrannical, aggressive dictator. So yes, I believe the war is in part about oil. But it's not as simplistic as some people would have us believe.

bonkey

Originally posted by Victor
Using some not very clever accounting he jumps from a value of $3,400bn to $140bn, purely to suit himself. This is where he goes wrong. If the oil is still in the ground and can be extracted, it is worth money.

The recent acticle that was commented on here indicated Iraq could produce for as little as $1 per barrel.

Interestingly, if you take $3,400bn at $25 dollars a barrel, you get 136bn barrels. which at 1$ per barrel (the extraction price you quote) gives a figure remarkably similar to the $140bn he quoted.

My guess, therefore, is that the 10$ per barrel is a typo, or the 140bn was a typo - one of them being out by a factor of 10.

This, to me, would make far more sense than someone trying to con the world with dodgy math.

jc

Victor

Originally posted by Victor
The recent acticle that was commented on here indicated Iraq could produce for as little as $1 per barrel.

Does anyone have this link?

Originally posted by bonkey
Interestingly, if you take $3,400bn at $25 dollars a barrel, you get 136bn barrels. which at 1$ per barrel (the extraction price you quote) gives a figure remarkably similar to the $140bn he quoted. My guess, therefore, is that the 10$ per barrel is a typo, or the 140bn was a typo - one of them being out by a factor of 10.

I don't think it is it, look at the figures below. He is liking it to a bank account with $10m in it where you can only take out $100 a day (= €3,600,000 per century, you would never exhaust the account). His falacy (errors aside) says that bank account is only worth what you can withdraw and doesn't allow for the potential to increase the withdrawal rate. And the comparison of a very large, but finite amount of oil is problematic when comparing it to a theoretically infinite amount of money.

His calculation (corrected)

Total reserves
= 112,500,000,000 bbls
= $2,812,500,000,000 in the ground (not his $3,400bn unless you factor in higher prices in future as "some analysts" do)

Current extraction
= 900,000,000 bbls (based on his 0.8% extraction rate)
= $22,500,000,000 Sales per year (his $23bn figure)

If you capitalise this amount (the reverse of a mortgage calculation) payment / rate = capital (not strictly true)
$22,500,000,000 Sales per year (his $23bn figure)
/ 10%
= $225,000,000,000 Capitalised (his $230bn figure)

But we have to take off the cost of production
$10 /bbl
x 900,000,000 bbls (based on his 0.8% extraction rate)
=> $9,000,000,000 Cost of production per year
=> $90,000,000,000 Capitalised cost of production (/10%)
=> $135,000,000,000 Capitalised nett income (his $140bn figure)

My calculation (if I am right)

Total reserves
= 112,500,000,000 bbls
= $2,812,500,000,000 in the ground (not his $3,400bn unless you factor in higher prices in future as "some analysts" do)

Current extraction
= 900,000,000 bbls (based on his 0.8% extraction rate)
= $22,500,000,000 Sales per year (his $23bn figure)

If you capitalise this amount (the reverse of a mortgage calculation) payment / rate = capital (not strictly true)
$22,500,000,000 Sales per year (his $23bn figure)
/ 2%
= $1,125,000,000,000 Capitalised (his $230bn figure)

But we have to take off the cost of production
$1 /bbl
x 900,000,000 bbls (based on his 0.8% extraction rate)
=> $900,000,000 Cost of production per year
=> $45,000,000,000 Capitalised cost of production (/2%)
=> $1,080,000,000,000 Capitalised nett income (his $140bn figure)

This guy is so far out he even refers to replacement costs for oil "A cost of Iraqi oil .. replacement of as little as $10 a barrel". Now I can understand replacement cost for a product or tangible asset, but not for a natural resource (not in any meaningful way, waiting all those millions of years for the oil to mature would really throw the numbers out).

Turnip

Originally posted by Biffa Bacon
Or is it just mindless repetition of Marxist propaganda?

Originally posted by DadaKopf
It's not just about oil. It's about money. It's about business interests. It's about extending and 'stabilising' US/Western interests throughout the region. It's about creating a market borne strategically from sanctions and legitimated as 'structural adjustment packages'. It's about legally placing more US military in the region to secure US business interests. It's about introducing 'democratic reform' so that Iraq will be made comply with neo-liberal economics. It's about a plan to bypass OPEC's control of the oil through the exploitation of the oil-for-food programme. It's about keeping China weak. It's about US domestic politics and the consolidation of traditional bases of Republican support in preparation for the next election.

It's not about global terrorism. It's not about political Islam, or Al Quaida, or Osama bin Laden. It's not about human rights (I wish it was).

That sounds like mindless repetition of marxist propaganda to me.

Wook

i wonder who owns 'the Financial Times' ....

ZeFrog

It also has been said that if France doesn t back up US for a war on Iraq, it s because of its interest there. I have found the following which is the answer from the embassador of the frogs in US :


Critics have said that France has been reluctant to support the U.S. position because of many investments in Iraq, oil contracts and other investments, that may have some sort of economic impact on the country. Do you care to comment on those criticisms?

AMB. LEVITTE: I'm so glad that your raised this question -- (laughter) -- because it provides me the possibility to give you answers. You have to know that the oil-for-food program, which is the program bringing food, medicine, some equipments to the Iraqi people, is the only way to have trade with Iraq. And we are not the first partner. We are not the second partner. We are not the third partner of Iraq. Nor the fourth, nor the fifth. We are the 13th -- 1-3, 13th partners of Iraq. You can check the statistics of the U.N. I know them by heart. (Laughter.)

Second, oil. We buy 8 percent of Iraqi oil. The U.S. is buying -- the latest statistic to my knowledge -- 56 percent of Iraqi oil. I could go on like that. It's a question that I know well. Iraq is not an important partner for France. It doesn't mean that it is not an important partner for everybody in the future. But now, the only possibilities for trade are oil-for-food. There is no possibility to invest in the oil industry. This is forbidden -- no signature of contracts, and so on and so forth.

So the only statistics that you can have are the oil-for-food program -- we are the 13th partner -- and the export of oil, which is the only resource of Iraq today, and we buy 8 percent, and the U.S. buys 56 percent of the total oil exports of Iraq.

Thank you very much.

----

http://www.info-france-usa.org/news/statmnts/2003/levitte_iraq020703.asp

Wook

finally it seems I have found a smart politician.. good article !

bonkey

Originally posted by Turnip
That sounds like mindless repetition of marxist propaganda to me.

Funny, cause the marxist propaganda is that its *just* about oil, whereas Dada is arguing that it most definitely is *not* just about oil.

Then again, one-line asnwers which make allegations but dont bother to actualy try and argue their point in any way sound like mindless repetition of soundbites to me.

Why bother arguing your side when you can just cast stones at the others, right?

jc

Meh

Originally posted by bonkey
Funny, cause the marxist propaganda is that its *just* about oil

Uh, no. The Marxists would argue that the war is about the capitalist elite trying to gain even more power over the proletariat. The Marxists would completely agree with DadaKopf's comments that the war is to "secure US business interests" and create a captive market through abuse of the OFP. "Oil is money is power".

http://www.marxist.com/MiddleEast/iraq_delenda_est_carthago.html

The fact is that the ruling clique in Washington long ago (before September 11) made up its mind that Saddam Hussein must be overthrown and Iraq must be occupied. What are the reasons for this stubbornness? There are various: political, strategic, economic and even personal. George W. Bush, who incidentally "won" the last presidential election through a blatant fraud, wishes at all costs to remain in the White House. Since there is just over a year before the next presidential elections, he calculates that a victorious little war would do his chances no harm. After all, just look what the Falklands war did for Margaret Thatcher. The fact that many people will die in such a war is surely a trivial consideration compared to the political future of George W.!

Although it is an over-simplification to characterise the coming war as a "war for oil" (there are other elements in the equation), there cannot be the slightest doubt that oil plays a most important role.

Not sure where you got your ideas about Marxist propaganda from; sounds more like an extreme environmentalist stance to me.

Biffa Bacon

Originally posted by DadaKopf
It's not just about oil.

But how is it in any way about oil?

It's about extending and 'stabilising' US/Western interests throughout the region. It's about creating a market borne strategically from sanctions and legitimated as 'structural adjustment packages'.

Do you really think the US is going to spend hundreds of billions on invading and rebuilding Iraq in order to stabilise business interests?

It's about legally placing more US military in the region to secure US business interests.

How does the US military secure US business interests?

It's about introducing 'democratic reform' so that Iraq will be made comply with neo-liberal economics.

How will Iraq be made comply with neo-liberal economics?

It's about a plan to bypass OPEC's control of the oil through the exploitation of the oil-for-food programme.

When Saddam is gone there will be no need for the sanctions and thus no need for oil-for-food.

It's about keeping China weak.

How will invading Iraq keep China weak?

It's about US domestic politics and the consolidation of traditional bases of Republican support in preparation for the next election.

If it is, then Bush must have forgotten what happened to his father after the last Gulf War.

It's not about global terrorism. It's not about political Islam, or Al Quaida, or Osama bin Laden.

That's exactly what it's about. It's about planting the seed of democracy in the sewer of the Arab world, where Islamofascism festers.

It's not about human rights (I wish it was).

Do you doubt that the human rights situation in Iraq will be massively improved after Liberation?

Victor

Originally posted by Meh
http://www.marxist.com/

Odd isn't it that it's a ".com" (commercial) site. [QUOTE After all, just look what the Falklands war did for Margaret Thatcher. The fact that many people will die in such a war is surely a trivial consideration compared to the political future of George W.![/B][/QUOTE] And on the other hand the last Gulf War didn't really help George senior did it?

Loomer

This Article contradicts itself in the third paragraph.

"Iraq's yield is only about 0.8 per cent, the lowest yield of the top 14 oil-producing countries except for Kuwait's, which is the same. Such a relatively low production level is not a management or political choice that can be reversed. As in Kuwait, it occurs because of the geology of the oil fields and the available technology."

It has been stated by experts that Iraqis low yeild could be incresed with better technolgy.

This article states firstly that the low yeild can not be reversed by better management and in the very next statement implies that poor technology is part of the contibuting factor.

And I thought FT was reputable.

Meh

Originally posted by Loomer
This article states firstly that the low yeild can not be reversed by better management and in the very next statement implies that poor technology is part of the contibuting factor.

"Management" is not the same as "technology". Obviously you're not a programmer...

Loomer

Originally posted by Meh
"Management" is not the same as "technology". Obviously you're not a programmer...

Are you not able to comprehend context. The interchanging of words does not effect the meaning of the statements.

Meh

Originally posted by Loomer
Are you not able to comprehend context. The interchanging of words does not effect the meaning of the statements.

It does, when the words interchanged mean different things (look in the dictionary!). The Iraqis could have the best oil technology in the world, but if they weren't able to organize and manage their drilling operations properly, they'd still have problems. Conversely, even the best management in the world won't compensate for obsolete drilling equipment.

Loomer

Ok, but you except that oil experts have stated that Iraqi oil yeild could be greatly increased with better technology which contradicts the articles statements.

Meh

Originally posted by Loomer
Ok, but you except that oil experts have stated that Iraqi oil yeild could be greatly increased with better technology which contradicts the articles statements.

The FT article says:

[the low production level] occurs because of the geology of the oil fields and the available technology.

Implying that the production level could be improved with better technology. No contradiction whatsoever.