The war in Iraq is going badly, in many ways. Beyond the obvious problems of shifting rationales for the incursion, increased attacks against occupation forces with casualities, the shortage of boots on the ground, terrorist attacks aimed at indigenous Iraqi security forces, suspicious beheadings, and the whole Abu Gharif prison scandal that has stripped the United States of any claim to legitimacy, there is the whole money pit problem.
Administration officials scoffed at and then essentially fired a consultant (Army rank?) who suggested it would cost hundreds of billions of dollars and require hundreds of thousands of troops. Yet this man deserves wider recognition and commendation for speaking honestly to the American public and government about the situation. He has been proven right: we need more troops in Iraq. We also need to radically revise how their deployment is conducted, but I don't want to sidetrack myself there.
But he was also right on the costs of the war. It was a big deal when President Bush asked for $86,000,000,000 last year to cover the costs of reconstruction. Due to foreseeable yet unforeseen problems (the shortage of troops is one), this number has fallen short and another 26 (or was it 36?) billion dollars was requested.
We were told that Iraqi oil would pay for the war, but those who were familiar with the state of Iraqi oil extraction facilities said it would take billions of dollars and up to a decade to reach optimal production. The coalition has done a good job in the environment that it has been working in, and I'm not here to criticize what has been done. As far as I can tell, they've restored production to levels that surpassed what it was at when Saddam moved out. Mind you, we are a year into the decade of rebuilding, and the security situation makes it very difficult for private companies to move in and help out. Again, not criticizing the CPA for what they haven't been able to do, just making note of the situation.
What this means is that there isn't enough money right now. Troops are under provisioned and goods intended for the Iraqi people aren't able to be bought and deployed. US Army veterans who were captured in the first gulf war and awarded monetary settlements as a result of their mistreatment as POWs have had the money (which was supposed to have come from Iraqi coffers) diverted back into the country to pay for reconstruction. It is no exaggeration to say that the war in Iraq is hurting for money.
Which brings me to oil prices. The United States is not enough of an oil producer to have control over oil prices; OPEC is though. What I'm about to say isn't fact, just a possibility that I think is very likely and probable. High oil prices benefit oil producing countries. The United States could probably exert pressure or extract favors from Saudi Arabia (and OPEC by extension) that would increase the flow of oil and reduce prices. But high prices benefit Iraq as well. It's more money in local coffers for the same amount of product sold.
High prices are a domestic problem for an encumbent president seeking reelection, but asking for billions of dollars more to help pay for his war is probably more damaging. Gas prices typically are higher in the summer, so that trend can be used to defuse some of the dissatisfaction. Gas prices are also out of the direct control of the government so even in the worst case, it isn't a major issue that has to be directly addressed in an election year.
If this is true and the government is not doing what it could to reduce prices (or even worse, asking OPEC for help in raising prices), it is a hidden tax or revenue production scheme that taps the wallets of Americans. The president could ask for, say, $50,000,000,000 directly or could ask for 1/2 of that and raise the rest by selling higher priced oil from the occupied country.
Finally, if this is true, expect major price drops at the end of the summer right before the election. Americans consume more gas in the summer (hence the typical price rise), so waiting until the end taps the greatest consumption period. Dropping prices also benefits the incumbent in the election. It could even be a 'scratch my back and I'll get yours" with OPEC et. al: keep prices up in the summer and we both benefit but help me out in the fall by opening up the spigots.
Then again, I'm probably just paranoid.
Finally, finally: This is kind of what we should expect in a few years when consumption outstrips production. There will still be plenty of oil, but we won't be able to pull it out of the ground fast enough to fill everyone's tanks. You think prices are high now...
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Posted by Nutrimentia at May 17, 2004 01:50 PM | TrackBack