JOURNAL: Oil disruption effectiveness in Iraq

Iraqi oil ministry figures indicate that during 2006 (based on the data, 2007 will be nearly identical), there were 159 attacks on its people and facilities. The result was a sustained loss of production calculated to be 400,000 barrels a day. At an average price of ~$80 a barrel, that's over $11 billion in lost production during 2006 -- or an average value per attack of ~$73 million. That's a Return on Investment per attack of ~3.6 million percent (assuming a generous $2,000 per attack average).

The effectiveness of these attacks is even greater than the above if you include:

• Systemic effects. Many of these attacks had knock on effects on Iraq's refined fuels. This has forced Iraq to spend its limited funds to import over $200 million a month in gasoline and other products. It has also had an impact on electricity production.
• Future effects. Investment in Iraq's oil fields has stalled. Oil firms are unwilling to invest the billions due to the uncertainty caused by these attacks. Since it takes up to five years to realize returns on new investment, Iraq will not see any major improvement until well into the next decade.
• Global effects. Global oil production has stalled/slowed (for a variety of systemic factors) in the face of rapidly rising demand (mostly Chinese). Further, new sources of production are barely able to match declines in existing fields. Prices have risen to near historic highs as a result. So, given that Iraq is the only major oil exporter with large amounts of untapped potential, its dysfunction will have a major impact on future prices (and very likely, global economic health).

Comments

[Duncan Kinder]

Global guerrilla activity appears to be linked not only in Iraq but elsewhere to unrest arising from disputes over not only oil but other commodities.

See:

India:
quote:

ndia has significant mineral resources, including:

* 2.92 billion tons of bauxite (10 % of the world’s supply)
* 276 billion tonnes of coal
* 23 billion tons of iron ore deposit

But these resources have gone mostly untapped due to Naxal and tribal activism and generally inept economic regulatory practices by the government. As the central government moves to cut its excessive red tape, the states with the most resources, Orissa, Jharkhand, Madhya Pradesh, Chhattisgarh and Rajasthan, are clamoring to retain control. They seek:

* Assurances that multinational firms will not control large tracts of land.
* Limit and then phase out resource exports to fuel the development of an organic manufacturing industry.
* Larger funding streams (five percent) into their coffers to be used for development and governance.

Ironically, these states barely have the ability to prospect their land, but are forced to pander towards the lowest economic classes to whom the loss of land is akin to an attack on their way of life. It is no coincidence that the states clamoring for control are also the most affected by Naxalites.
:end of quote
http://naxaliterage.com/?p=48

Bolivia

quote:

The dispute with eastern Bolivia, where most of the country’s natural gas and food are produced, is the most pressing crisis of his presidency. Mr. Morales, a member of the Aymara ethnic group who is Bolivia’s first indigenous president, acknowledged that the dispute had intensified after his supporters approved a controversial draft constitution.

:end of quote
http://www.nytimes.com/2007/12/20/world/americas/20bolivia.html?ref=world

[pm2075]

"Emergence. Henry established a funded open source war, populated by a host of violent groups and independent contractors, against the Nigerian government and the global oil companies operating in the region. Given the fluidity of this networked organizational form, it is likely a replacement (or replacements) for Henry will emerge soon."

... they're already here but in the other continent. The Americas.

http://www.bloomberg.com/apps/news?pid=20601086&sid=aEljU.u2BFGc&refer=latin_america

... and it looks like they're having a ball at it with oil prices being as high as it is.

The Colombian Free Trade agreement is only going to fuel activities such as these. Lower oil prices may quell the these disruption activities but try driving down a runaway freight train of ever higher oil prices. Think of what these elements(current and new) will evolve into when gas reached $20/gallon. Distracted will be the understatement of the 21st century of a superpower.