EGEE 120
Oil: International Evolution

The Quest Chapter 7 - War in Iraq


The Quest Chapter 7 - War in Iraq

Consider the following questions:

  • How does the road to war in the 1930s compare to the road to war in the 2000s?
  • What were some of the reasons for the Iraq War?
  • Where does oil fit into this war?

Why the War, Oil, The Oil Industry: “Dilapidated and Deplorable”

The section from the Quest reviews the reasons behind the war the United States engaged with Iraq post 9-11. This allows us to compare the road to war in Japan and Germany, and in the United States years apart. Some similarities and some differences, but an undeniable fact is that the oil industry was impacted by both. Some could argue that oil caused both wars, some others could argue that both wars highlighted the value of oil. I hope to bring out that the reality I see is somewhere in the middle, and that any time war occurred since World War I - oil was included in the consideration.

World War II was a delayed reaction to the end of World War I. Similar to how the Iraq War of 2003 could be considered a delayed reaction to the Gulf War of 1991, Japan of WWII underestimated the United States' reaction. Similarly to how Iraq & Saddam Hussein were only focused on the regional blustering, did not have the United States in focus, but Iran, Hussein is thought to have said, “The better part of the war was deceiving,” thus showing his focus on Iran and boasting about weapons available. The threat of an armed opponent was a guiding fear factor. 9-11 attack has been compared to the attack on Pearl Harbor. However, after 9-11, there was not a clear adversary for the United States. Iraq and Afghanistan were ways to prevent war, but nothing was as clear as to when Japan attacked Pearl Harbor. Pearl Harbor attack was specifically planned by a military, with a country backing it. 9-11, the adversary was vaguer, and the shadows of intelligence gathered about terrorist organizations loomed large and menacing.

So, what do these have to do with oil? - WWII, Japan was seeking more oil sources. The United States has a fear of losing oil supplies, also. But did the individual attacks, Japan on Pearl Harbor and the United States on Iraq, actually increase access to oil? Japan still had to seek out new oil supplies in the East Indies, and the United States had to stabilize and rebuild the oil industry in Iraq. Neither direction increased access to oil quickly, and neither was a stable and secure option.

View from the International Oil Companies' Perspective:

Fears: Feared Backlash, Lacking stability, WAR, Skepticism, Extreme Caution, Alarm, Doubtful Democracy.
International Oil Company Fears
K Jensen, May 2017

Lacking stability does not encourage foreign investment. The oil companies wanted to know about how the political system would work and impact their investment. They wanted to know about the economic system and contracts… What would guarantee security to their investment? Then and only then would the oil companies invest. But the United States Government could not guarantee any security of the investment or the knowledgeability to build a stable investment environment. Thus, was the war really all focused on the oil industry? The goal of the US Government would be to keep the oil available on the world market in general. The loss of any percentage of oil production is not just a shortage for one country but a decreased amount of oil available for everyone.

Box represents Oil available on World Market & a box with no corner represents oil available on the World Market minus Iraq both point to The World.
Comparison between Oil Market with Iraq in the World Market vs Without Iraq Oil 
K. Jensen, May 2017

Then, enter the other view that the oil companies were pushing for oil access. Oil companies do have an increased demand for oil resources to fuel the engaged militaries. Would this be a case of application of the “Rule of Capture” - sell as much oil as possible while the war happens? Or would the oil companies have learned from how this principle impacted the industry? Steady gains more profit than quick.

Iraq had been operating under a nationalized oil industry. We know the challenges and corruption that comes with the Petro State. Yet, we can also see the citizens from a nationalized industry receiving the profits and being able to ideally receive benefits from the natural resources they live on. Iraq had long term goals in the 1970s for 6 million barrels a day. This long term goal was stopped by the Iran/Iraq war of the 1980s, then the Gulf War of the 1990s. Their continual participation in wars have hurt the Iraqis' ability to develop and advance their oil industry.

Upon review of the Iraqi oil industry and infrastructure - the country had stopped developing in the industry approximately 50 years earlier. Any technological advances were not from government coordinated production development, but the individual skill and innovation of the Iraqi oil engineers. We remember when the USSR fell, and the state of the Baku oil fields; well, this is much of the same. These countries did not develop or advance their oil industry but relied on the consistent Petro income to finance the rest of the government, leaving the state of the industry a shadow of what once was. To give perspective - the developing stopped with a foreign investment before the country nationalized their oil industry, we will cover more about Iraq later, but this is an interesting comparison: Oil field maps.

With Saddam removed from power, the focus of the United States military was finally security. This is what the oil companies were focused on from the start, but the military was focused on changing the regime. Comparison to ponder: Thinking that the oil companies could speculate the vast income from the Iraq War is like Rockefeller allowing Standard Oil to be split up so he could multiply his wealth, or Japan attacking Pearl Harbor to increase their Gross Domestic Product (GDP).

U.S. imports from Iraq of crude oil and petroleum products. See credit below for link to external site with accessible data.
Here is a chart showing the Oil Imports to the United States from 1996 - 2016 US Imports from Iraq. For specific data clink the link in the credit.
Credit: EIA