Busting Conspiracy Theories (#1) - Blood for Oil Part 1: Supply and Demand

Steve wrote...

I chased you down from ITM to respond to you're War for Oil post.

If Bush was asked to make a list of reasons he chose Iraq for the first Democratic Domino in the Middle East, Oil would be on the list. Way down at the bottom, but it would be there.

Near the top would the fact that the US has been technically at war with Iraq since 1990. The end of the war was a cease fire, not a truce. Also near the top would be Saddam's insistence in making the world believe he had WMDs and his human rights record.

I decided Steve's comment would make a good jumping off point for my next series of rants called "Busting the Conspiracy Theories". First things first. All conspiracy theories are based on at least a modicum of truth. Yes. Even the CTs (conspiracy theorists) have part of the story right. The problem is that the rest of the story is usually 75% wrong or left out of their conspiracy theories. Of course, they will tell you if you don't believe their story, you are delusional or naive or brainwashed, etc., not them.

The problem with the giant government conspiracy theories is that, really, the secrecy would be too hard to keep. For instance, do you know how many people would have to be in on a "government" conspiracy? Think about it. Governments are full of bureaucracy. Purchasing a light bulb has to go through 10 people before the actual request for purchasing can go through. How in the world would you keep a giant conspiracy to let's say, take over the worlds supply of oil, secret?

Most conspiracy theories can be "busted" by simply looking up the available information. My favorite method of busting conspiracy theories is the use of factual numbers. You see, numbers don't lie. They can't be inferred. They are real. This is why numbers are the basis for all scientific study. My real job as an analyst requires me to daily find and relate numbers to a specific situation. For my first conspiracy busting project, I will define the "Blood for Oil" myth, prove it's falsehoods and the part that is true.

Yes. Part of the CTs assertion that this war is for oil is true. Steve's comments are true. However, if the statement is left as it is, without significant explanation, the CTs latch on to and say, "see, we are right". However, OIL is not the reason for the war, but it does have it's own significance in terms of world economics and how the stability of the Middle East is important to the continuing stability of all countries (not just the US). I will explore this in part 3 of "Blood for Oil" and why it is in every countries interest to insure this stability and how Iraq actually fits into this problem.

To start this out right, let's get things clear: The war in Iraq is not for Iraq's Oil


Supply and Demand of Oil: USA Production, Consumption and Purchasing Rates

I was reading some statistics about oil consumption and costs of production, etc. The US gets about 20% of it's oil from that region, but other countries get upwards of 50%. Any interdiction in the pumping or distribution of oil from the region would mean these economies collapse. If the these economies collapse, the economy of the US collapses. If the US economy collapses, you guessed it, the whole world goes into an economic depression. That's why statbility in the Middle East is important. No one can afford to have the ME go up in a ball of flames.

I can't really say it any better than the Belmont Club. He has already put together a serious compendium of oil utilization per country, from what regions of the world, prices per barrel, etc. He has used information gathered from the Energy International Agency

But, let me make this very simple for those who are confused:

• The United States supplies: 8.9 mil barrels/day
  
• The United States demands: 20.4 mil barrels/day
  
• The United States oil balance: -11.5 mil barrels/day from other sources
  
  This is not to say that the US keeps all 8.9 mil barrels it produces. This is actually more representative of a trade deficit than actual supply and use in the US. However, all countries fall under this same oil utilization structure, so this is an accurate method to determine how much oil from any country the US actually needs.
  
  
  
• US Oil from ME Region = 21% of total demand: 4.28 mil barrels/day
  I know this probably shocks you, but it's correct. The US buys less oil from the ME region than we actually produce ourselves. We buy less oil from the ME than Korea (82%), Europe (28%), Japan (76%), and China (100%).
  
  
• US Oil demand from Iraq = 15% of ME Region demand: 642k barrels/day
  
• Oil production in Iraq: 2.5 mil barrels/day
  
• % of Iraqi oil purchased by US: 24%
  
• % of Iraqi oil purchased by other countries: 76%
  
• % of Iraqi oil purchased by US compared to US demand: 3%
  
  Now for the important fact:
  
  
• Pre war % of total Iraqi oil production compared to US demand: 12%

Are you getting the picture yet? The US is barely purchasing any of it's oil requirement from Iraq. The total Iraqi output of oil just barely tops 12% of our total needs. So if the US was going to war for oil, how come we invaded a country that can't supply more than 12% of our total needs? Why is Iraq selling their oil to any other country besides the US? Why aren't we keeping 100% of the oil production for ourselves? Why are we only purchasing 3% of their oil?

That's it! I'm calling the President! What kind of boob would go to war for oil and not keep the oil for himself...er...I mean, our country?

Stay tuned for the next "Busting Conspiracy Theories part 2 of Blood for Oil: Value of Iraqi Oil vs. Cost of War" where we will explore how much money is made from Iraqi oil, who gets it and, why, if the war was just for oil, it would have been cheaper to lift the sanctions against Iraq and cut a deal with Saddam (like the rest of the world did). I will even include a section on how much money Haliburton is really making (or not making).

Sources
DOD: Working Papers/Status of Iraq
Table 2.1 Oil Demand, Energy International Agency/excel spread sheet