Iraq

The Indicators of Success in Iraq?

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The Associated Press reported today that gas lines in Iraq are as long as two miles, but how could that be the case in a country that is on the cusp of signing oil contracts with potential revenues close to $100 billion? Irony of ironies, the very same "liberation" that freed Iraq's oil market also destabilized the country to the point that it can't even use its own resources:

[S]ectarian strife, rampant corruption, lack of adequate refineries and inefficient government institutions limit the positive impact that increased public revenues could have on average Iraqi citizens like Habib Hadi, who queued up for gas at 4 a.m. Tuesday.

After waiting more than four hours, he said he finally edged close to the gas station and "saw a catastrophe."

"The gas pump was not working because of the lack of electricity," Hadi said.

This bewildering anecdote follows yesterday's news that the no-bid contracts Iraq offered to Exxon Mobil, Shell, Total, BP, and Chevron are "under negotiation" until god knows when; not that it matters one way or another to the Iraqis waiting in gas lines. With no infrastructure to refine crude, they might as well be pumping chocolate pudding.

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  1. What are they charging, at the pump, for gas in Democracy’s Petri Dish, these days? I seem to recall a subsidised price in the neighborhood of twenty-five cents per gallon. Market-clearing, indeed.

  2. This should be a much bigger story. One of the biggest of the war.

  3. From TFA:
    The official price for a liter of gasoline in Iraq is the equivalent of about 38 cents, or about $1.44 a gallon. But the black market price, which has risen significantly in recent days, can be almost three times that amount.

    d’oh!

    (that twenty-five cent number was per liter, I guess)

  4. rampant corruption, lack of adequate refineries and inefficient government institutions limit the positive impact that increased public revenues could have on average

    Oh, I thought this was about the way we mess up our own market here.

    Moving along. Nothing to see here.

  5. do not worry people…once we kill another couple million people in Iraq the gas lines will get shorter.

  6. I think mockery may have actually worked for once on the “no bid” contracts, but I forget where I saw the story, and I have no idea if it’s true. One would think Iraqi citizens would want bids on something as valuable as their oil, even if that means rampant acts of capitalism might be encouraged…
    JMR

  7. JMR –
    Don’t be ridiculous. Everybody knows that capitalism would only benefit teh corporashuns! Capitalism wouldn’t benefit teh people, even in this case. I have no way of backing that up, but I don’t have to because I freak out at people every time they suggest that capitalism could work for teh people! You’re just not as enlightened as me, sorry. I’m going to go fold my arms and stare at you for a while now.

  8. even if that means rampant acts of capitalism might be encouraged…

    I don’t think the Mesopotamians have any historical bias against capitalism; I suspect many of the people waiting in line for cheap governmment gas will siphon it out of their tanks and resell it at a profit to people whose time is more productively spent than waiting around in gas lines.

  9. “I’m going to go fold my arms cross my legs and stare at you for a while now.”

  10. I don’t think the Mesopotamians have any historical bias against capitalism; I suspect many of the people waiting in line for cheap governmment gas will siphon it out of their tanks and resell it at a profit to people whose time is more productively spent than waiting around in gas lines.

    Muslims are quite open to capitalism. Muhammad was a merchant before he went into the propheting business. As such, merchants are viewed positively (as long as they’re not money lenders).

  11. I don’t think the Mesopotamians have any historical bias against capitalism;

    Well, their idea of banking and usury sounds a little fishy.

  12. No-bid contracts. Ah-ha. The buzz word to get everyone worked up. How about the correct term? Technology Support Agreements. TSAs are simple consultancy contracts to help Iraq raise the production during the interim period before the ministry enters into long-term contracts to develop the oil and gas fields. I am wary of government programs that bypass competition, but calling TSA’s (which btw include many industry players) no bid contracts is not completely honest, and only hurts your valid argument. Also, the term “no bid contracts,” generally refer to the process of a government entity awarding an entire program/effort to a single source (not multiple industry players) without competing the effort to realize a better value.

  13. Well, their idea of banking and usury sounds a little fishy.

    It’s no different than Christian theology. There’s a reason Jews were traditionally the bankers in the Middle Ages.

  14. One source of many problems in Iraq is the U.S. policy of promoting state socialism in electricity and fuel and shutting down nascent free market efforts.

    Back during the time of the Bremer administration, U.S. soldiers would routinely shut down generators whose owners were selling electricity – arrest black market gasoline sellers etc.

    Now imagine what would have happened is they had allowed free markets in those critical goods? How many sick people would be helped if they had dependable sources of enerfy? How many industries and shops would have been able to conduct business? How many people would have not taken up arms because they would have jobs that allowed them to support themselves and their families?

  15. So far as the architects of this aggressive invasion/belligerent occupation are concerned the lack of usable petrol in Iraq is a feature, not a bug.

    How’s that vile maxim go again? “All for us, none for them”? Something like that…

  16. George Bush could fuck up a cup of coffee.

    I’m half expecting him to comment on this story by merely saying “I drink Iraq’s milkshake!”

  17. So a bunch of people in an ostensibly free country protected by US troops are standing in line complaining about the price of gas.

    Sounds like Iraq just became the 51st state.

  18. Funny, I was in the region in 2004. When we looked poised to change history.

    I actually was convinced and would convincingly tell everyone who was interested in the topic of the “Operation Iraqi Freedom” that Iraqi oil was truly an afterthought, that America is too rich, powerful and principled to blatantly pull what the British pulled in the middle east: the facade of a legitimate government that is a cover for the uninterrupted flow of the life-blood of the west; Oil.

    Boy was I naive!!

    Even prominent members of our elected oligarchy (John “i hate gooks” McCain) still can’t tell the differences between Sunnis and Shias, Arabs and Persians, etc… Experience my ass!)

    What’s wrong with letting the people of that land just sell their oil to us without us controlling them?

  19. The average person in Iraq likely feels that things were much better of when the mass murderer Saddam was in charge.

    The road to Hell …

    I bought “a humbler foreign policy” in ’00. I was much wiser in ’04. GWB’s profession of humility was and is 100% bovine excrement.

  20. If gas is $4.25, I guess “No Blood For Oil” has actually become “No Oil For Blood.”

  21. George Bush could fuck up a cup of coffee.

    Or a wet dream.

  22. tarran,

    Now imagine what would have happened is they had allowed free markets in those critical goods?

    A deliberate effort to get people to look to the central government.

    It might have worked, if that government had turned out to be even remotely capable.

  23. One source of many problems in Iraq is the U.S. policy of promoting state socialism in electricity and fuel and shutting down nascent free market efforts.

    Much like the previous despot; the guy whom we were for, before we were against.

  24. “I bought “a humbler foreign policy” in ’00.”

    Did you keep the reciept??

    Anyway, that product you bought in ’00 is no longer in production. It’s been replaced by the new non-humble, non-everything-we-said-during-the-’00-campaign-in-regards-to-foreign-policy model.
    Check out this speech Condi Rice gave the other day.

    http://www.foreignaffairs.org/20080701faessay87401-p0/condoleezza-rice/rethinking-the-national-interest.html

    The speech basically contradicts every thing that they ran on in ’00

  25. Our (The USA’s) actions can even be argued to be Pareto Efficient…

    So long as you don’t model the Iraqi people as participants or players. This is just what they get for squatting on top of other peoples’ oil like they do.

  26. “I bought “a humbler foreign policy” in ’00. I was much wiser in ’04. GWB’s profession of humility was and is 100% bovine excrement.”

    Well, at least McCain ain’t lying to you J sub D. He’s right out there with his non-humble foriegn policy!

  27. gmatts and j sub d
    Don’t you know that 9/11 changed EVERYTHING?

  28. Well, at least McCain ain’t lying to you J sub D. He’s right out there with his non-humble foriegn policy!

    I expect Michigan won’t be close in November. That is OK because that way I won’t be forced to cast a vote for a Democratic presidential nominee. I doubt that anything will happen to convince me to vote for McCain. Since Obama the populist/socialist is going to runaway with my state, I’ll be very comfortable voting for Bob Barr.

  29. One source of many problems in Iraq is the U.S. policy of promoting state socialism in electricity and fuel and shutting down nascent free market efforts.

    Gas prices are fixed by the government in neighboring Gulf Arab countries and prices are amon the lowest in the world (e.g., $1 a gallon for premium in Saudi) and no fuel lines.

    Electricity is provided by a quasi-government “corporation” and prices are fixed and the service is (I would argue) much better than in the north east in the US.

  30. The average person in Iraq likely feels that things were much better of when the mass murderer Saddam was in charge.

    Especially Christians, if last Sunday’s 60 Minutes is anything to go by.

  31. Gas prices are fixed by the government in neighboring Gulf Arab countries and prices are amon the lowest in the world (e.g., $1 a gallon for premium in Saudi) and no fuel lines.

    Electricity is provided by a quasi-government “corporation” and prices are fixed and the service is (I would argue) much better than in the north east in the US.

    Yes, an overbearing government can successfully provide moronically simple services. One struggling to get on its feet can’t.

  32. Memo to whoever blew up the local electric grid: What in the World were you thinking?

  33. Pssst! “bewlidering“?

  34. Yes, an overbearing government can successfully provide moronically simple services. One struggling to get on its feet can’t.

    The point is that services suck in Iraq because of the instability, and not because it lacks the free market environment. The free market is not the cure if there is no stability.

  35. The point is that services suck in Iraq because of the instability, and not because it lacks the free market environment. The free market is not the cure if there is no stability.

    Hard to tell, now, isn’t it? Surely if gas is not sold at a market price — i.e., as high as required to prevent lines from forming — or electricity is not sold at a market price — i.e., as high as required to prevent any time rationing — then there is absolutely no incentive for anyone to make any effort to raise the supply or even to pay for security measures to protect supply from instability.

  36. Heh, this reminds of an Instapundit email:

    UPDATE: Reader Walter Boxx emails: “The way the Japanese could tell they were losing WWII was that the great victories reported by their media were getting closer and closer to home. Our media problem is like a fun-house mirror version of this – the way we can tell we are winning is that our crushing defeats are happening less often and to different enemies.”

    The main reason for the long gas lines is well-known and is entirely positive: as with cell phones and generators, there are far more cars in Iraq than in 2002, because the sanctions have ended and the regime’s prohibitive tariff scheme was ended.

    By this estimate, by 2005 the number of cars had doubled.

    http://www.brookings.edu/saban/~/media/Files/Centers/Saban/Iraq%20Index/index.pdf

    Does anyone think we wouldn’t have gas lines here if the number of cars doubled in three years?

  37. Dave W. | July 1, 2008, 11:37am | #
    No blood for oil.

    No oil for blood, it seems.

  38. The point is that services suck in Iraq because of the instability, and not because it lacks the free market environment.

    Exactly, gov’t’s only legitimate function is to protect the rights of citizens. Iraq’s new elected government is just beginning to fulfill that role, as we saw with the spate of “Dark Ages Ending in Basra” articles when the Iraqi Army moved in and took the city back from the Shia militias.

  39. Well, their idea of banking and usury sounds a little fishy.

    That varies from place to place. In Tehran and Riyadh, their alleged “unIslamic” nature might be an issue; in Dubai and Baghdad, not so much. The Iraqi government has lots of little loan programs to help small businesses; our Provincial Rreconstructions Teams are helping coordinate quite a few.

  40. Does anyone think we wouldn’t have gas lines here if the number of cars doubled in three years?

    I think we wouldn’t.

    Firstly, because everyone who wants to drive here already does. Having four cars in the garage instead of two does not mean you buy twice the gasoline. You buy gasoline to travel, not to fill up n cars.

    But even presuming for your sake that the number of drivers also doubles, there would not be gas lines here because the oil companies and gas stations would charge a market price. The market price for supply constrained gasoline means, on average, a car at every pump and no line.

  41. MikeP,

    True on both points.

    In a similar situation (longstanding artificial constraints on car purchases suddenly removed) we’d probably have $40/gal gasoline instead.

  42. I doubt it. At prices nearing $10 per gallon, the US would be importing gasoline hand-over-fist from Mexico, Canada, Europe, and anywhere else anyone with a tank on a boat could get to.

    Which is why Iraq should be importing gasoline from Saudi Arabia, Iran, Jordan, Israel, etc., to make up for the lack of refinery capacity. But they have price controls. So they have lines instead.

  43. They actually do import quite a bit, and to their credit they’ve tripled gas prices from the old Saddam-era subsidy. A market system would certainly be better though.

  44. Wow, the increase was actually eightfold, not threefold:

    NOTE ON INFLATION: According to the U.S. Department of Defense’s quarterly report on Iraq for March 2007, fuel shortages
    contributed to the increase in inflation for 2006. A liter of petrol jumped from 50 dinars per liter to 400 dinars from the end of 2005 to early 2007.

    The Bank Of Iraq has been buying back dinars to fight inflation. They got it down to 5% in 2007.

  45. “The way the Japanese could tell they were losing WWII was that the great victories reported by their media were getting closer and closer to home. Our media problem is like a fun-house mirror version of this – the way we can tell we are winning is that our crushing defeats are happening less often and to different enemies.”

    Very interesting, in light of the fact that there were stories about gas lines in Baghdad back in 2003, too. And the same people making the same arguments about more cars.

  46. After waiting more than four hours, he said he finally edged close to the gas station and “saw a catastrophe.”

    “The gas pump was not working because of the lack of electricity,” Hadi said.

    This indicates to me that this is a government owned station; an entrepreneurial private owner (particularly one with control over prices) would have his own generator at the ready, to avoid lost sales due to (government) power outages.

  47. They actually do import quite a bit, and to their credit they’ve tripled gas prices from the old Saddam-era subsidy. A market system would certainly be better though.

    Oil prices have gone somewhere from a quintupling to a septupling since the war. Tripling gas prices is merely marking to market.

  48. (John “i hate gooks” McCain) still can’t tell the differences between Sunnis and Shias, Arabs and Persians, etc… Experience my ass!)

    Well I guess Obama won’t have any problem fitting Iraq in as 51st state of our 57 states.

    A gaff is only a gaff get over it.

  49. Hey look price controls make lines in Iraq just like they do here.

    Proof that free markets just do not work.

  50. Tripling gas prices is merely marking to market.

    Yeah, they actually went up 800%; there was a deliberate effort to move them closer to market so less gas would be stolen and sold on the black market. If you read the Iraq Index as of June 2007 some kinds of gas were actually at market (“premium”, whatever that means in this context).

    It’s a painful transition from socialism to market; just ask the Russians.

    Hopefully they can build some more refineries now.

  51. an entrepreneurial private owner (particularly one with control over prices) would have his own generator at the ready,

    No kidding. By some estimates the private generation capacity now actually exceeds state generation (this is also in the Index). Apparently it was virtually impossible to import generators before 2003.

  52. Are you intentionally obtuse? Gas prices tripled since the Saddam era subsidy’s because oil prices went up by more than triple. It has nothing to do with transitioning to capitalism. Are you sure you’re not a leftie posing as a rightie to make the left look good? Are you Ceasar?

  53. That varies from place to place. In Tehran and Riyadh, their alleged “unIslamic” nature might be an issue

    I don’t think you know what you are talking about. The so-called Islamic banking was banned in Saudi for a long time. Traditional, western-style banking was the only option until recently when the government started to allow Islamic banking.

    In other words, the spread of Islamic banking was not a result of government intervention, it was a response to consumer demand.

  54. tarran | July 1, 2008, 12:14pm | #

    One source of many problems in Iraq is the U.S. policy of promoting state socialism in electricity and fuel and shutting down nascent free market efforts.

    Back during the time of the Bremer administration, U.S. soldiers would routinely shut down generators whose owners were selling electricity – arrest black market gasoline sellers etc.

    Now imagine what would have happened is they had allowed free markets in those critical goods? How many sick people would be helped if they had dependable sources of enerfy? How many industries and shops would have been able to conduct business? How many people would have not taken up arms because they would have jobs that allowed them to support themselves and their families?

    joe | July 1, 2008, 12:33pm | #

    tarran,

    Now imagine what would have happened is they had allowed free markets in those critical goods?

    A deliberate effort to get people to look to the central government.

    It might have worked, if that government had turned out to be even remotely capable.

    What they should of done is try to set up public electric grid, and make it operational; but not shut down private generators.

    The private electricity entreprenuers could have provided electricity to some people in the mean time, and continued as competitors to the government after the grid was up if they could get customers.

    Electricity, and some other utilities, are the kind of thing can be provided more efficiently, and to more people, if one has access to a large infastructure built in public space. But as long as the private generator owners are not physically obstructing the building/maintence/operation of that infastructure, I dont see a problem.

    In the event of successfully getting the grid working, some people would still have a reason to look to the central government. In the event of failure, at least nobody would be given a reason to consider the central government an entity hostile to their interests.

  55. Mo,

    Are you intentionally obtuse? Gas prices tripled since the Saddam era subsidy’s because oil prices went up by more than triple.

    Gas prices were set by the government, and they went up eightfold not threefold (which I’ve noted twice now, but I won’t accuse you of obtuseness or trying to discredit your ostensible cause). Marking them up toward market price was a deliberate policy to move toward a more market-like system, and had everything to do with transitioning to capitalism, as the State Department weekly briefs from that time make clear.

    anon,

    Who said it was gov’t intervention? I just said it varied from place to place.

  56. In fact, reducing the gas subsidy was just one facet of a much larger program to sell off nationalized companies, form a stock market, bond market, and futures market, and etc. There was a very deliberate and massive effort to transition towards capitalism.

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