Iraq War vs. Doing Nothing

To “secure” oil from the Middle East is one of the objectives of the U.S. government. It is one reason why the U.S. stations forces in the Middle East and makes wars there. However, it’s far from clear that anything has been “secured”. This accounts for the quotation marks around “secure” throughout this message.

One alternative to military force in Iraq was to have left the Middle East’s countries to their own devices. Perhaps one country would have attained dominant control over oil, perhaps not. Suppose oil prices had been jacked up as a consequence of a dominant supplier. As far as oil supply to the U.S. goes, the worst case for oil prices may have been a “high” price for imported crude. How high? Suppose the price became 50 percent higher. Suppose instead of paying $30 a barrel, we had to pay $45. Suppose that instead of paying $50, we had to pay $75. The main value of the military “security” would have been a lower price by $15-$25 dollars a barrel.

Any supplier, even one that dominates several countries, cannot make money by leaving the oil in the ground. Any government needs and wants money, if only to keep the population in line. These facts limit the possible price hikes. They also cannot risk blackmailing the U.S. politically because that will cause the U.S. to attack them. In other words, an imaginary Middle Eastern oil monopolist doesn’t have as much freedom to control the market as one may think. But no such monopolist exists anyway, and no such empire dominated by one country such as Turkey, Iran, Iraq, Libya, Syria and Saudi Arabia exists.

A 50 percent monopoly or cartel premium is a high estimate as monopoly price hike estimates go, but it’s also not unreasonable. Common estimates of monopoly premiums run about 10-25 percent. In some situations like some drugs, they may run 100 percent. The higher one makes this estimate, the greater appear to be the benefits of preventing such cartel pricing.

The comparison raised here is the cost of the Iraq War viewed as a measure to prevent the emergence of a monopoly price charged by a dominant supplier versus doing nothing and perhaps paying a monopoly price if one country becomes dominant, like Iraq or Iran or Saudi Arabia or perhaps some alliance of these and others.

The U.S. government spent at least $1 trillion on the Iraq War so far. This is really a very conservative estimate. (Some estimates go higher, but they double count interest on war debt.) The number of barrels of oil imported from OPEC countries between 2000 and 2017 was roughly 28 billion.

The $1 trillion estimate doesn’t include pension costs and it doesn’t include the costs of Navy vessels in the region and other bases. The money spent hasn’t produced “security” for future imports. They will “require” ongoing expenditures. This estimate excludes the costs of lives lost and injured on all sides and capital goods destroyed.

If $1 trillion has been spent to “secure” 28 billion barrels in total, the per barrel cost is $1 trillion divided by 28 billion. That comes to roughly $36 a barrel. This exceeds the rough estimate of $15-$25 a barrel that might have arisen through the consolidated market power of a dominant country or cartel. It is very likely that the low-ball and partial costs of militarizing the “security” of oil have cost twice as much as having done nothing at all. A $30 barrel of oil has become a least a $66 dollar barrel due to the military costs. Furthermore, the actual price of oil was driven up by the war itself. Oil was $28 a barrel in 2003 and it rose to $64 by 2007. A sharp commodity price rise typically accompanies wars.

Into the bargain on the supposed “benefit” side is “securing” Israel and its approximate 8 million population, but this is a purported benefit to Israelis, not Americans. The U.S. has given Israel about $3 billion a year in direct military aid to achieve its “security”. This has been raised to $3.8 billion a year for the next 10 years. Apparently the Iraq War didn’t buy permanent “security” for Israel.

Is Israel more “secure” now that this war has occurred? Israeli opinion is divided (see this and this.) We can say with a high degree of certainty that the problem of Israel’s “security” has not gone away due to the U.S. invasion of Iraq and the Iraq War.

The U.S. government spills a lot of blood and spends a lot of taxpayer treasure to attain “security”. It mortgages future generations up to the hilt as it claims to ward off dangers and threats and tries even to eliminate them entirely. The waste in this quest for “security” is gigantic because the wished for “security” hardly ever, maybe never, materializes. Reducing dangers and threats usually leads to new dangers and threats that are even worse than the original ones. The alternative of doing nothing is appealing in important cases like that of the Iraq War. The alternative of simply living with various dangers and threats is really not a bad idea.


7:16 am on December 4, 2018