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Iraqi oil and oil prices:
'Orthodox' economics only looks at 'supply and demand', and assumes that all
that is needed for oil prices to fluctuate is for supply to rise and fall.
In fact, however, prices of oil, as of all raw materials whose main supply
is in politically weaker countries, depends on the political and strategic
strength of the exporter countries at the time in question. The massive
price rises of 1973-4 and 1979-80 were caused by the fact that the OPEC
countries for a wide variety of reasons had the West 'over a barrel' -- the
Soviet Union was keeping the West under pressure, the West was suffering a
series of massive defeats on the world stage, etc. The oil price crash of
1985-6 was due to the successful Reagan counter-offensive rolling back these
gains.
The return of Iraqi oil to the world market would in an immediate sense add
supply and thus have a downward influence on prices, but if it goes with a
return of political and strategic influence to the oil exporting countries,
then ('paradoxically' from the point of view of supply-and-demand economics)
oil prices could well go up.
Hugh
-----Original Message-----
From: Seb Wills <saw27@cam.ac.uk>
To: soc-casi-discuss@lists.cam.ac.uk <soc-casi-discuss@lists.cam.ac.uk>
Date: 11 January 1999 13:12
Subject: Ease Iraq sanctions, says Saudi
>
>Seeing the report below, interesting in itself, made me wonder some more
>about the oil economics involved. I don't know much about economics, but I
>had thought that Saudi Arabia stood to lose a lot of oil revenue if the
>Iraq oil embargo was lifted (which makes the Saudi concerns voiced below
>all the more powerful). On the other hand, we also hear that Iraq's oil
>industry is unable to export even the limited amount of oil it is
>permitted to under oil-for-food. Presumably then, in the short term (until
>Iraq's oil infrastructure is rebuilt), lifting the oil embargo wouldn't
>affect oil prices and other oil-producing states wouldn't immediately lose
>revenue?
>Seb
>
>-----------------------------------------------
>
>BBC online
>Monday, January 11, 1999 Published at 01:31 GMT
>
>Ease Iraq sanctions, says Saudi
>
>Saudi is concerned about the effects on Iraqi population
>
>Saudi Arabia has proposed the lifting of the oil embargo on Iraq to
>alleviate the suffering of the Iraqi people.
>
>Foreign ministers from the six member states of the Gulf Cooperation
>Council discussed the Saudi plan in Jeddah on Sunday, but the meeting
>ended without a final statement.
>
>
>A senior Saudi official said restrictions on military sales should remain,
>but Iraq should be allowed to sell oil and other commodities freely, so
>that the Iraqi people would no longer be made to suffer for the sins of
>their rulers.
>
>The initiative comes despite renewed Iraqi criticism of Saudi Arabia and
>Kuwait for providing bases for US and British aircraft during the
>airstrikes on Iraq last month.
>
>The Jeddah talks were intended to bring about a consensus before a meeting
>in Cairo later this month to prepare for a full Arab summit on Iraq.
>
>
>Iraq is allowed by the UN to export $5.26bn worth of oil every six months
>to buy food and medicine, but correspondents say the so-called
>"oil-for-food" deal has not brought about any appreciable improvement in
>the condition of ordinary Iraqis.
>
>Baghdad complains the UN sanctions committee still blocks or holds up
>essential humanitarian supplies.
>
>At their summit last month, the GCC countries, of which Saudi Arabia is
>the largest and most influential member, called on Iraq to commit itself
>to implementing all UN resolutions to bring about the relaxation of
>sanctions.
>
>Disarray of international allies
>
>The BBC's Middle East Analyst, Roger Hardy, points out that Saudi Arabia
>is airing this point of view at a time of bitter criticism from Baghdad
>about the role of Saudi Arabia and Kuwait in the recent US and UK air
>attacks on Iraq.
>
>
>Our analyst suggests that the reported proposal does broadly reflect
>official Saudi feelings towards the Iraqi situation, although he doubts
>whether it has a chance of being adopted as Gulf policy.
>
>Kuwait remains firmly against any easing of the embargo against Iraq and
>initiatives by individual GCC states need to be endorsed by all six to
>become policy.
>
>Saudi Arabia and other US allies in the region have found themselves in an
>awkward position as opposition to US policy on Iraq has hardened among
>some Arab populations.
>
>The Saudi proposals come on the same day as an article by the
>controversial former UN weapons inspector Scott Ritter.
>
>Ritter alleges Washington has subverted and ultimately destroyed the
>credibility of Unscom, the UN special commission charged with disarming
>Iraq of weapons of mass destruction, by using Unscom data to support last
>month's raids.
>
>Roger Hardy concludes that while Baghdad remains defiant, international
>policy on Iraq is in disarray.
>
>
>
>
>
>--
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