Tuesday, August 15, 2006

It's Not About The Oil....

The world according to Ken Mehlman....
Republican National Committee Chairman Ken Mehlman said the Democrats have embraced a side of their party that wants to block President Bush's tougher anti-terror measures and would abandon Iraq to terrorists.

"Imagine a failed state on the second-largest oil reserves in the world," he said on NBC. "That's what would happen if we cut and run in Iraq, which unfortunately - which is what the Democratic Party has now made their orthodoxy."
I know that people have been making fun of him for conveniently forgetting the Bush Administration's insistence that we "Stay the Course," proposing that reference the Bush Administration's succession of failed plans for Iraq as a strategy to "Win by adapting". But this one deserves ridicule as well.

First, as you surely recall, "It's not about the oil". So how is it that the biggest concern Mehlman can describe as resulting from a premature departure from Iraq is who may end up controlling "the second-largest oil reserves in the world"?

Second, if it is about the oil, or if the oil was actually the last of our concerns but we choose to throw our hands up in despair about everything else, if we choose we can retain control of the oil fields. Or we can utilize our military might to prevent a "failed state" from pumping oil. Or we can utilize the UN to implement another "oil for food" program, although perhaps this time with better safeguards against corruption.

Third, how well are we actually doing at managing the oil fields and oil production? Giving all due respect to the pipe dreams of people like White House economic adviser Lawrence Lindsey, that the war would increase oil production and lower oil prices, Iraq is still producing oil in quantities below pre-war levels and the price of oil is... well, high. Oh, I love this stuff....
It is hard to say what impact this might have on oil prices, but markets clearly expect lower prices. On the eve of hostilities, oil was selling for about $37 per barrel. At this price, Americans would be paying $270 billion per year for oil. But once it became clear that Iraq’s liberation was at hand, the price quickly dropped to about $28 per barrel, cutting our annual oil bill by $70 billion. With full Iraqi production, the price might drop to $20 per barrel or less, giving us the equivalent of an annual tax cut of about $120 billion per year. And this is a tax cut the entire world benefits from.
I guess this means that, with oil trading at over $72 per barrel, Bruce Bartlett is now arguing that the Bush Administration brought us the equivalent of a $270 billion tax increase? No, I'm sure he would argue that any increase in the price of oil is due to factors completely independent of anything within the Bush Administration's sphere of control.... But if the goal truly is to keep oil wealth out of the hands of nasty people, the question of who controls Iraq's oil fields seems peripheral to the fact that the unpleasant regimes which control a significant number of oil producing nations are rolling in cash these days.

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