<<<<Or the pipe dream that oil will pay for Iraq's rebuilding. That's true in the long run -- when we are all dead. But the critical time in Iraq is the short term -- the next few months, or year or two. If we wait for oil revenues to roll in before the Iraqi people see improvement in their lives, Iraq is as good as lost.>>>>
Good points there.
Modern government economics can be defined in two words- deficit spending- spend today and pay it back in cheaper dollars,yen, whatever, tomorrow.
Borrow on the oil futures to spend what is needed today
1960 cars, $2500 - today $25,000
1950 houses $12000, $90/mo payments includes all taxes, fees, etc
Today $125,000 ( for same but now older house)
Consider Iraq oil, known reserves around 300 bil barrels, with probably more to be discovered.Future value at $100 barrel (in 10 or 20 years) is $30 trillion
( The Russians value just one Iraq oil field, Nohr Umar, at $850 bil.)
Cost to get production up to speed (3.5 mm bpd) is est $30 bil or 1/1000 the future value of production.
But as you note, this production provides not much person-, about $3 day.
Economic success for Iraq will depend far more on jobs and money movement within the populus, in the same way that personal spending carried our economy thru a terrible stock market trashing.
So whatever future is achieved by Iraq will be the result of personal jobs and spending- the flow of money throughout the economy. And the oil reserves , properly handled, will provide far more than is required to get the economy rolling.
The new government has be made aware that the oil money must be distributed to make things work properly in our Western mindset. Cannot do as Saddam or the Saudis do, keep civilians poor, spend all the income till deeply in debt.
It will not work perfect (per our thinking) , since there is terrible waste in any government. So our leaders can continue to be condemned for not making things perfect.
The critical thing governing Iraqs future is to get people in charge with a useful vision of what the Iraq economy should look like, and with a dedication to preventing powerful interests from absorbing or wasting that potentially vast oil wealth.
Sig
globalpolicy.org |
