Resource Wars

I have been pondering assertions and counter-assertions about whether the war in Iraq is about oil. The war is obviously about a number things, but the only question I want to focus on here is whether one can make out a case for Iraq as a resource war about oil.

First, you may remember that Tony Blair, the prime minister of Britain, was asked this very question, and he came up with a very sly answer. He said that if all we wanted was the oil, we could have just made a deal with Saddam to buy it. It would have been cheaper overall and much less risky. True enough.

This answer assumes, however, that the aim of a resource war is to seize resources and keep anyone else from getting them. All of this seems commonsensical and hard to refute. But, what if resource wars, at least this one, aren't about seizing resources and keeping others from getting them?

What could I mean by this? Well, this administration (which as I write seems to have earned a second term) knows that supplies of oil from the Middle East are crucial to the world economy. They also know that according to our own government projections Middle East producers are going to have to produce a lot more oil to keep up with growing demand. And, they know, or believe they know, that there are vast untapped oil reserves in the Middle East which could be unlocked with the proper investment and infrastructure.

And, herein lies the problem. Oil operations in the Middle East are all nationalized. Government-owned oil companies tend to be stingy in their exploration and development expenditures because the government wants to use a lot of the current profits for social and military expenditures. (I discuss this at the end of my article on peak oil.) So, they tend to underspend on developing oil reserves. Private companies, on the other hand, tend to seek to maximize their profits by extracting resources such as oil as soon as they are able.

Keep in mind that it doesn't really make sense for the United States to seize Middle Eastern oil fields and deny oil to the rest of the world. It would make fuel cheap in America, but it would flatten the world economy and, in turn, flatten our economy. And, it is hard to believe that Europe, India and China would sit idly by and let America strangle their oil supplies without a fight.

Well, of course, the Bush Administration knows this. So, one of their goals is to open up Middle East oil fields to private investment. That, in their view, would quickly and efficiently bring new oil onto the market and thus keep oil prices in check and supplies plentiful worldwide. At least, that's the reasoning.

Well, you can't open up those fields to private investment as long as state-owned enterprises control everything. So, you either have to persuade Middle Eastern governments to open their fields to private investment OR you have to take down those governments and open up the fields yourself.

This is what I think the Bush plan was in Iraq. It's not the administration's only aim, but it does put Iraq into the category of a resource war of the second type which I described above. Of course, things haven't been going according to plan and the use of the military force to open these fields may ultimately not be vindicated. But, my explanation does have the virtue of explaining how the Iraq war can be a resource war and yet not be designed to merely steer all Iraqi supplies to the United States and its allies.

The strategy, then, is to keep world markets well-supplied to keep prices down. This would presumably benefit everybody except oil exporters. But you probably guessed that somebody had to lose in the bargain.

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