Oil and Iraq

Alan Greenspan says the war in Iraq is, as lefties claim, All About Oil. That’s ignorant nonsense, and diminishes the man.

His claim:

America’s elder statesman of finance, Alan Greenspan, has shaken the White House by declaring that the prime motive for the war in Iraq was oil…

“I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil,” he says…

Britain and America have always insisted the war had nothing to do with oil. Bush said the aim was to disarm Iraq of weapons of mass destruction and end Saddam’s support for terrorism.

“Everyone knows” isn’t quite the standard of proof one would expect from an elder statesman. Still, let’s ignore WMDs for the moment and look at how important Iraqi oil was in 2003 to the US and UK.

Iraqi oil was and is irrelevant to the UK, which until 2006 was an oil exporter, so would be nuts to spend blood and treasure invading a competitor. See OECD net oil imports 1992-2006.

So let’s consider the US, which since the year 2000 has had annual oil consumption of about 20 million barrels/day.

Iraqi oil exports in 2000 were 2.1 million barrels/day, and have since fallen to about 1.4 million barrels/day.

When the US launched the war, US oil imports came from the following sources according to Al Jazeera :

Country Million barrels/day in 2001
Canada 1.79
Saudi Arabia 1.66
Venezuela 1.54
Mexico 1.42
Nigeria 0.86
Iraq 0.78
Norway 0.33
Angola 0.32
United Kingdom 0.31
Total imports 9.0

(Table is total petroleum products and excludes all countries from which the US imported less than 300,000 bpd in 2001).

Why would the US go to the cost of invading a nation supplying under 8.6% of its imports?

Protecting the wells can’t have been a consideration – Saddam was nuts, but not enough to shut off his only source of revenue.

Perhaps Greenspan and friends think the US intended to occupy Iraq and take its oil for free. But in that case why not go for the Saudis? After all, they financed and carried out 9/11, Iraq and Saudi Arabia both have about 27 million people so should cost about the same to subdue (assuming the US suddenly became an evil imperialist power), and the US would steal almost 3 times more oil from Saudi Arabia.

That leaves the possibility that the US feared Saddam might have stopped shipping oil to it. But in that case, as an economist like Greenspan must know, Saddam would have to sell his oil to another customer, displacing their current supplier. Who would promptly have switched to supplying the US.

And if all else failed and the US lost Iraq as a supplier and failed to replace it, the US is surrounded by oil – Canada (170 gigabarrels), Mexico (maybe 100 gigabarrels) and of course the US itself (oil shale – 800 gigabarrels). That’s enough for a few centuries.

All this tells us the Greenspan isn’t a numbers man, which may explain the sub-prime disaster.

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4 Responses to Oil and Iraq

  1. JT says:

    Maybe saying that the war is all about oil is an oversimplification but nevertheless I believe it’s the single most important reason why we are there. Saddam and his supposed WMD’s plus his rogue nature made for a nice premise for invasion. We are trading partners and friendly with the government of Saudi Arabia. The oil reserves in Iraq are some of the largest in the world and have been underutilized in the past. There are vast quantities of cheap oil in Iraq for whomever has access to them. It’s not really about the amount of oil we got from Iraq in the past. Also, with China growing as fast as it is there will certainly be more competition in the future for cheap middle east oil. We will better be able to bargain for access with a large military presence in occupation. I’ve only read that North American reserves are quite limited compared to the middle east and Canadian shale oil is very expensive to extract. The key word is “cheap” and that’s what the oil in Iraq is. Unfortunately it’s quite expensive when measured in lives.

  2. Gandalf………Interesting that Greenspan criticizes Bush for spending (which is appropriate) yet praises Clinton when Bush spent to appease the Democrats and Clinton was fically responsible only because in 94 he got a conservative Congress. I would have though he could have sorted that out better.

    JT……I see that oil is the reason for the war only in the sense that said oil provides the Middle East countries a lot of money to wage Jihad around the world and threaten world peace.

    …………steve

  3. gandalf says:

    JT

    I guess it’s true that if Saddam had stayed in power with $80/barrel oil, he’d have his nukes by now, and might be back in Kuwait and/or menacing the Straits.

    Still, Mr Greenspan has now said he was quoted out of context, so maybe we’re all right!

    Your lives v oil point is well taken. Plus most of the current US trade deficit (and $ weakness) is driven by energy imports, so it’s selling its assets (capital) to foreigners to pay for imported oil (consumption)!

    A mix of nuclear power, biofuels, and (albeit expensive) oil from tar sands would not only greatly improve US security, but restore its trade balance.

  4. gandalf says:

    steve

    Agreed.

    I must say this episode diminishes the man in my eyes – he seems just to be promoting his book, like a B list celebrity.

    He owes himself better than that.

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