Mission Accomplished

[Extra Stout]

Deals With Iraq Are Set to Bring Oil Giants Back (http://www.nytimes.com/2008/06/19/world/middleeast/19iraq.html?ref=business)


BAGHDAD — Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.

The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq’s Oil Ministry.

[Oh, Gee!!]

does this mean gas will be $1.00 per gallon soon?

[Viva Las Espuelas]

wow.

[clambake]

does this mean gas will be $1.00 per gallon soon?

no. it means our troops will focus on a new mission securing the wealth.

[boutons_]

As Chris Rock jokes about the price of oil in his current tour:

"When my family invades IHOP, pancakes are gonna be cheaper at my house."

[MaNuMaNiAc]

Seriously, if this doesn't erase any doubt about why the US invaded Iraq, nothing will. The US has quickly lost all credibility as a global governing body. They do what the want, without repercussion. You've gone from stalwart representative of democracy to common thug in a matter of years.

[whottt]

Seriously, if this doesn't erase any doubt about why the US invaded Iraq, nothing will. The US has quickly lost all credibility as a global governing body. They do what the want, without repercussion. You've gone from stalwart representative of democracy to common thug in a matter of years.



Um.

Saddam was a dictator, he's gone and a Democracy is installed, the first true Democracy in an Arab country since the height of the cold war. The people of Iraq are no longer living under crushing sanctions and this will be a huge boost to their economy...


What do you think the economic conditions in Iraq were prior to this war?


Idiot.

[whottt]

So tell me idiots...which Oil companies would you have preferred be given these deals?


Or you would you have preferred the Democratic Government of Iraq leave them nationalized? Because that works so well...


Or would you have preferred the Oil be buried and used by no one and let the Iraqis eat sand?


Morons....


Psss: Iraq is also back on the global market and fully back in OPEC ...whoo us. We sure do know where our discount is buttered....and it damn sure wasn't under the OFF Program. Nope...no subsidized Oil there...whatsoever.

[MaNuMaNiAc]

Um.

Saddam was a dictator, he's gone and a Democracy is installed, the first true Democracy in an Arab country since the height of the cold war. The people of Iraq are no longer living under crushing sanctions and this will be a huge boost to their economy...


What do you think the economic conditions in Iraq were prior to this war?


Idiot.

That's not the fucking point now, is it? The whole pretext about the war on terror bullshit, and liberation of Iraq is completely blown. I won't argue Saddam was a ruthless dictator, but don't come here with that "true democracy installed" bullshit. You haven't installed shit. Iraq is in shambles. The minute the US gets out of there, what the fuck do you think is going to happen??

Of course, now that the US plans to have oil interests in Iraq, I doubt you will ever truly "leave". The only thing this war has proven is the US has carte blanche to do whatever they want.

My main concern here is the US has lost its moral high ground. What the fuck are you going to say if Russia decides to invade a neighboring country under the pretext of national security? In short, the US will lose its status as the peace keeper of the world, if it hasn't already.

[whottt]

That's not the fucking point now, is it? The whole pretext about the war on terror bullshit, and liberation of Iraq is completely blown. I won't argue Saddam was a ruthless dictator, but don't come here with that "true democracy installed" bullshit. You haven't installed shit. Iraq is in shambles. The minute the US gets out of there, what the fuck do you think is going to happen??


If it happens right now? A massacre of biblical proportions that will make the last 6 years look like a love in.


But don't bitch about that...bitch about the idiots wanting us to pull out...


Because they are the ones that will legislate that slaughter, and waste every American and Iraqi life lost in the conflict in the process.


They won't even be paying attention to that massacre...I mean they didn't when it happened when we pulled out of Vietnam...

Well, they might notice it to blame the Bush admin for taking us in in the first place.




Of course, now that the US plans to have oil interests in Iraq,

Idiot...how can you classify those companies as the US having Oil interests in Iraq is beyond me...but what isn't beyond me is that it completely confirms your ignorance on this subject.



I doubt you will ever truly "leave". The only thing this war has proven is the US has carte blanche to do whatever they want.


If by whatever you want you mean go into a country that was in violation of every ceasefire agreement they signed...you're right.


If you mean anything else or fail to take tht into account...you're an idiot.




My main concern here is the US has lost its moral high ground. What the fuck are you going to say if Russia decides to invade a neighboring country under the pretext of national security?

Probably not much...

But I dout they'll be doing it because that country violated a ceasefire agreement with them...






In short, the US will lose its status as the peace keeper of the world, if it hasn't already.


I see...and who do you feel now has this status?


Enlighten me....

[xrayzebra]

That's not the fucking point now, is it? The whole pretext about the war on terror bullshit, and liberation of Iraq is completely blown. I won't argue Saddam was a ruthless dictator, but don't come here with that "true democracy installed" bullshit. You haven't installed shit. Iraq is in shambles. The minute the US gets out of there, what the fuck do you think is going to happen??

Of course, now that the US plans to have oil interests in Iraq, I doubt you will ever truly "leave". The only thing this war has proven is the US has carte blanche to do whatever they want.

My main concern here is the US has lost its moral high ground. What the fuck are you going to say if Russia decides to invade a neighboring country under the pretext of national security? In short, the US will lose its status as the peace keeper of the world, if it hasn't already.

Let me see if I have this right.

Iraq is not suppose to produce oil. Even though that is about all they have to export.

And

The OILCO's that are American, but do business
worldwide, should not buy/produce/or help produce because it will show that is all we went to Iraq for.

Gee, I didn't know that. It is good to know these things.

:lmao:lmao:lmao:lmao

[whottt]

Those Oilcos aren't even all American is the funny thing...


Total is French....


That's the A #1 thing that pisses me off about this news.


I'd prefer all the companies be American owned, with maybe a Brit or Dutch company thrown in, but mainly us...since we just footed the fucking bill for cleaning up Europe's mess and trashed our economy in the process.



No French Oil Company should be in Iraq right now...that pisses me off.

[JoeChalupa]

It was always for oil..any idiot can see that.

[whottt]

It was always for oil..any idiot can see that.


Did you figure that out on your own? Or just pick it up off a bumper sticker?


Anyone that thinks this war was entirely about Oil...especially Iraq's Oil, is an idiot.


Why didn't they just make the deals with Saddam?

[boutons_]

"Saddam was a dictator, he's gone"

The bogus reason the WH/Exec/neo-c*nts agreed that they all could get behind was WMD, and sent sucker Gen Powell up the UN to lie about WMD.

NOT Saddam.


"and a Democracy is installed"

no, Iraq is not even a sovereign country, and won't be forever under dubya's secret SOFA, which formalizes Iraq as a occupied colony of the USA.


"the first true Democracy in an Arab country"

:lol :lol :lol Whott, the inveterate believer of dubya's lie, said "true" :lol

"The people of Iraq are no longer living under crushing sanctions"

They have been bruatalized by US military and Blackwater and Aegis, murdered and raped in the 100s of 1000s, far exceeding the murders of Saddam. They are living without sufficient jobs, money, water, electricity, health care, etc, etc. There's a huge spike in the numbers of babies born with birth defects. The Iraqi doctors are convinced it's the 1,100 tons of depleted uranium dubya has shot at Iraq. Yes, Iraqis are so much better off now than under Saddam.

"this will be a huge boost to their economy..."

The US is holding $50B of Iraqi money in NY Federal Reserve and threatening not to give to Iraq if Iraq doesn't play ball with the oilcos.

Do you really think the oil money in Iraq will "trickle down" to Iraqis? It doesn't trickle down for US oilcos in the USA! :lol

Poor Whott, totally snookered by dubya's lies and he still won't man up admit, still desperately trying to justify the unjustifiable. :lol

[2centsworth]

The war was about installing a democracy in the middle east, whether you think that's good or not is not the point.

For those who think it was about oil, I don't see the profit incentive? Right now the Oilcos are making the most they have ever made with limited supply and high demand. How does increasing supply make them more money? What's the motive?

[boutons_]

More on the supreme quality of Iraq life during dubya's oil-for-war:

http://www.alternet.org/waroniraq/88733/

[Oh, Gee!!]

What's the motive?


controlling a major portion of the earth's oil reserves.

[boutons_]

"Total is French...."

... explains Sarkozy sucking off dubya several days ago in France.

No non-US/UK oilco would be in Iraq now without US approval. I fully expect that France has paid the US to get into Iraq at this point.

[2centsworth]

controlling a major portion of the earth's oil reserves.

We already have control of a major portion of the earth's oil reserves right here in the USA. My question is where is the profit motive? Tapping those reserves and increasing supply will only reduce prices, when oilcos are making record profits with the status quo.

[Oh, Gee!!]

We already have control of a major portion of the earth's oil reserves right here in the USA. My question is where is the profit motive?

Iraq contains the second largest reserve in the world, so were not talking small potatos here.


Tapping those reserves and increasing supply will only reduce prices, when oilcos are making record profits with the status quo.

you can sell for less if you sell more.

[2centsworth]

Iraq contains the second largest reserve in the world, so were not talking small potatos here.

2nd largest in the middle east I thought, but I could be wrong. I read where the USA in Colorado and Montana that there are about 100 billion barrells, but again I could be wrong.




you can sell for less if you sell more.

where's the proof that would be a net positive over the current situation. I would think that would actually be a negative because it would trigger a surge in supply by Saudi and other suppliers.

Seems to me the current situation is the best they have ever had it.

[Extra Stout]

2nd largest in the middle east I thought, but I could be wrong. I read where the USA in Colorado and Montana that there are about 100 billion barrells, but again I could be wrong.

The proven oil reserves of the United States of America are 21 billion barrels. This includes the Bakken formation under Montana and North Dakota.

Underlying much of the western United States are vast oil shale deposits, which, if anybody ever figures out an economical large-scale way to exploit them, could provide up to the equivalent 2.5 trillion barrels of oil. Shell is working on an experimental in situ process in Colorado in which they heat the rock with elements drilled into the ground to crack the kerogen into oil.

[Oh, Gee!!]

Iraq's Oil Reserves: Untapped Potential
While its proven oil reserves of 112 billion barrels ranks Iraq second in the world behind Saudi Arabia, EIA estimates that up to 90-percent of the county remains unexplored due to years of wars and sanctions. Unexplored regions of Iraq could yield an additional 100 billion barrels. Iraq's oil production costs are among the lowest in the world. However, only about 2,000 wells have been drilled in Iraq, compared to about 1 million wells in Texas alone.

http://usgovinfo.about.com/library/weekly/aairaqioil.htm

yeah, no incentive for the oil companies. :rolleyes

[Extra Stout]

We already have control of a major portion of the earth's oil reserves right here in the USA. My question is where is the profit motive? Tapping those reserves and increasing supply will only reduce prices, when oilcos are making record profits with the status quo.
There is always a tension between keeping prices robust and maintaining market share.

[boutons_]

"The war was about installing a democracy in the middle east"

The Repugs and neo-c*nts admit the WMD was the primary reason they could all get behind (as opposed to the real reason, oil), and that's what they sent Powell to the UN with. Democracy? GMAFB

"I don't see the profit incentive"

You think the oilcos don't know how to make profits selling oil? Esp when it's the US govt is picking up the tab for busting the oilcos into Iraq?

"How does increasing supply make them more money"

Who said US/UK oilcos ripping off Iraq oil, when new production comes on line in a few years (if ever), was going to increase total supply? (as other sources of oil are depleted or withheld)

Who said increase in supply was going to reduce prices?

The Saudis have announced they will increase by 500K barrels in July. We'll see if it makes any difference in the $130 price. If it doesn't, that's another $65M/day into Saudi pockets, $23B/year

If the US oilcos ripping off Iraq oil decreases the price, I'm sure other countries, like Saudi Arabia, will be happy to reduce their oil to support the price, keeping their oil in the ground for future generations while selling enough now to support their obscene lifestyle, now that $130 price has been shown not to force down demand. Why would the world oil exporters EVERY allow the oil to go back down?

Even if the 5M barrels/day that the US oilcos can pull out of their permitted leases in the Gulf of MX, but can't get to, do you think the world price of oil would go down?

[jochhejaam]

Untapped Potential
While its proven oil reserves of 112 billion barrels ranks Iraq second in the world behind Saudi Arabia, EIA estimates that up to 90-percent of the county remains unexplored due to years of wars and sanctions. Unexplored regions of Iraq could yield an additional 100 billion barrels.

And just think, all that oil is now ours, it's all ours!!

Mwaa-ha-ha-ha-ha!

[BushDynasty]

And just think, all that oil is now ours, it's all ours!!

Mwaa-ha-ha-ha-ha!

Hell yeah! I gotta fund my retirement, it ain't easy bein' right alla time. But it shur is proffittable.

[Oh, Gee!!]

it's all ours!!

Mwaa-ha-ha-ha-ha!

I can totally picture Cheney saying that in a Mr. Penguin voice.

[Fabbs]

:clap
More on the supreme quality of Iraq life during dubya's oil-for-war:

http://www.alternet.org/waroniraq/88733/
People who live(d) there will tell you for all the downfalls of Sadamism Iraq, its 8 million times worse under dubullyas dictatorship.

[2centsworth]

yeah, no incentive for the oil companies. :rolleyes


again, you have yet to prove the profit incentive. How is increasing supply going to make the Oilcos more profits than they have today?

[Extra Stout]

again, you have yet to prove the profit incentive. How is increasing supply going to make the Oilcos more profits than they have today?
I asked my boss why we don't cancel our capacity expansion projects and gave him your foolproof economic acumen as a reason. He rolled his eyes.

[DarkReign]

Big fucking surprise.

Terrorism my ass. "Iraq Democracy" is the definition of an oxymoron.

The only thing holding the country together is because the US troops patrol the streets, etc.

The moment that stops, civil war breaks out and these 4 oil companies are going to regret being in the region...or should I say, their employees will regret being there.

Spin it anyway you want, the US went into Iraq for fear of (and I quote) "weapons of mass destruction". Violation of cease-fires/treaties were just underlying motives. When no WMDs found, it was spun into "installing democracy".

We have yet to see that flimsy notion shot down as well. Soon.

[bobbybob0]

2nd largest in the middle east I thought, but I could be wrong. I read where the USA in Colorado and Montana that there are about 100 billion barrells, but again I could be wrong.

So why do you need to go overseas to extract oil?

US gvt. is pushing for the OPEC to produce more oil but don't want to open up its own reserve although it's the country that eats most of the WW production.

:ihit

[boutons_]

If you ask the US oilcos whether they'd rather extract known, high-quality, shallow Iraq oil vs explore and extract from offshore leases, what do you think the answer will be?

I say Iraq.

[bobbybob0]

If you ask the US oilcos whether they'd rather extract known, high-quality, shallow Iraq oil vs explore and extract from offshore leases, what do you think the answer will be?

I say Iraq.

Considering the barrel's price currently, any mining plants is welcomed.
Above 100$/barrel there's no ressources that are not profitable.

Total has even started exploiting "oil sands" (some of the least efficient minings) for that matter.

( http://en.wikipedia.org/wiki/Athabasca_Oil_Sands )


Those Oilcos aren't even all American is the funny thing...

Total is French....

That's the A #1 thing that pisses me off about this news.

I'd prefer all the companies be American owned, with maybe a Brit or Dutch company thrown in, but mainly us...since we just footed the fucking bill for cleaning up Europe's mess and trashed our economy in the process.

No French Oil Company should be in Iraq right now...that pisses me off.

Please, choose your stance.

If the goal was to setup a democracy in Iraq, open market is a byproduct of this and Total or whoever can try and make business with the new gvt.

If the goal was to secure ressources for American companies only, that's colonialism.

[2centsworth]

I asked my boss why we don't cancel our capacity expansion projects and gave him your foolproof economic acumen as a reason. He rolled his eyes.

I'm asking questions. Please feel free to answer them or ask your boss to post.

btw, I rather sell one house for $1million then sell 10 houses for 100k. If increasing the supply is what would make these companies the most money, and then why doesn't OPEC open up the spickets? You may want to ask your boss about that one too.

Also, is allowing IRAQ the freedom to award foreign companies all of the oil contracts part of the overall conspiracy?
http://news.yahoo.com/s/afp/20080622/bs_afp/usiraqoil_080622131740

[scott]

btw, I rather sell one house for $1million then sell 10 houses for 100k. If increasing the supply is what would make these companies the most money, and then why doesn't OPEC open up the spickets? You may want to ask your boss about that one too.



Would you rather sell 1 house for $1 million, or 10 houses for $200k? Just becuse your supply increases ten-fold does not mean price decreases ten-fold.

Quantities and prices do not move by the same amount, is the answer to your question.

[boutons_]

"award foreign companies all of the oil contracts"

they're getting the crumbs after the big US/UK oilcos get to the big fields.

[2centsworth]

Would you rather sell 1 house for $1 million, or 10 houses for $200k? Just becuse your supply increases ten-fold does not mean price decreases ten-fold.

Quantities and prices do not move by the same amount, is the answer to your question.

I agree, but the supply demand ratio seems to be spot on for the oilcos at this point. How would a dramatic increase in supply affect the bottom-line? I'm thinking commoditizing oil would be a very bad business decision.

If Iraq comes to market they will supply as much as possible to earn every dollar they can. The Saudis and others will have to increase supply just to keep up. We would see a snowball effect IMO.

The point is, I'm open to the argument that we invaded iraq for Oil, but all I ask is for people to prove it with financial facts. If you supply the facts I'll support you, not you specifically Scott.

[PixelPusher]

"award foreign companies all of the oil contracts"

they're getting the crumbs after the big US/UK oilcos get to the big fields.
...and from an Iraqi national perspective, Shell, Exxon and Chevron are "foreign" oil companies too.

[scott]

I agree, but the supply demand ratio seems to be spot on for the oilcos at this point. How would a dramatic increase in supply affect the bottom-line? I'm thinking commoditizing oil would be a very bad business decision.

If Iraq comes to market they will supply as much as possible to earn every dollar they can. The Saudis and others will have to increase supply just to keep up. We would see a snowball effect IMO.

The point is, I'm open to the argument that we invaded iraq for Oil, but all I ask is for people to prove it with financial facts. If you supply the facts I'll support you, not you specifically Scott.

Well, there are a lot of variables that could determine what impact increased Iraqi oil would have on the market, quality being one of them.

Remember, the price of oil you see quoted is for West Texas Intermediate (WTI) crude oil. There are a number of international benchmarks, this is the one we use in the US. Other crudes trade based on a discount or premium to WTI. For example, Mexican Maya crude has been trading for about $20 recently. That is $20 less than whatever WTI is. So now the Mexicans are getting $115/bbl as opposed to the $10-20 they were getting just a few years ago.

Most Iraqi crude is on the lighter end of the spectrum (even what they call "Basrah Heavy" is more like a medium grade in terms of gravity), but it is also more sour (heavier in sulfur content). Since crude oil have significant and distinct quality characteristics, it is different than most commodities. It is entirely possible (though not probable) that increase Iraqi crude production would have ZERO impact on WTI price, but would instead result in a widening of sour crude differentials (the discount sour crudes trade at).

Another important thing to consider about "BigOil" expanding their production, is that "BigOil" only controls about 10% of the global production of crude oil. So, incremental volume is important for them - and since all oil falls in price, but they only care about their own, then it increases profits. A 50% increase in volume for a single company is not a 50% increase in global supply (which is what the price is based on).

I haven't done the work to tell you one way or another if the increased supply would mean a BIGGER decrease in price (which would mean supply is elastic and total revenues would drop as a result - all else equal), but even if supply were elastic, it could still be profitable. Consider the following example:

Assume company "Scottoco" has leases in the Gulf of Mexico and can pump 1 MMBPD barrels of oil, which it can sell for $100/bbl on the open market with a cost to the company of $25/bbl (and a profit of $75/bbl). So right now my profit is $75MM/day (MM = million)

Let's say that Scottoco gets Iraqi contracts for another 1 MMBPD, which accounts for about 1.1% of global oil supply. For illustration, lets say this results in a 5% decrease in the price of crude oil. In this Iraqi oil field, it still costs me $25/bbl to extract.

So now I am selling my crude for $95/bbl, but I have 2 MMBPD at $70/bbl margin. That means my profit is now $140MM/day.

In this (extremely simplified) example, price would have to fall all the way below $62.50/bbl to have a NEGATIVE impact on profits for this company. So, a 1.1% increase in oil supply would have to result in a 38.5% decrease in price. Not going to happen.

Remember, we need to consider the microeconomic approach to identify the incentive for individual companies, not the macroeconomic approach. If we assume that all oil sells for $100 before and $95 after, then yes, total revenues (and all else equal, profits) fall - but they INCREASE for the companies that increased their volume.

I'll leave the "reasons for invading Iraq" discussions to others.

[whottt]

:king
"Total is French...."

... explains Sarkozy sucking off dubya several days ago in France.

No non-US/UK oilco would be in Iraq now without US approval. I fully expect that France has paid the US to get into Iraq at this point.


So tell me whore...

Was oil also why Chiraq was sucking Saddam off? Not to mention Putin, Schroder, and every other government owner of a pseudo "privatized" oil company named in the OFF scandal?


You know....the countries that had all the Post Sanction Iraq Oil deals, and who, incidentally, opposed the war, and wanted the sanctions lifted...


Companies like...oh, Total for instance.


Was it about Oil then whore? Or just after 2003?


What about Vladimir Zhirinovsky, Alexander Voloshin, Benon Sevan...Charles Pasqua?

Kofi Annan(and son)!

Was it about Oil for them too whore? Or just Bush?


Why did Saddam invade Iran and Kuwait whore (and give serious consideration to Saudi Arabia)...

Was that about oil too whore? Or did it just begin with Bush?



You don't think it's about Oil for Usama...whore?


Are you really that fucking stupid?



I guess you are.

If you are outraged by oil...then be outraged by oil...not just when it suits you, whore.


Whore.

Lying whore...

Deceitful whore.

Stupid whore.

[whottt]

Total, TotalFinaElf, Elf Aquitaine...


Boutons doesn't give a shit what that company does...


It's done everything he accuses the American companies of attempting to do...to a far mroe genocidal and disastrous degree...


boutons doesn't care...because he only hates America.



His views are worhless...he is pure bias and double standard.

[PEP]

Total, TotalFinaElf, Elf Aquitaine...


Boutons doesn't give a shit what that company does...


It's done everything he accuses the American companies of attempting to do...to a far mroe genocidal and disastrous degree...


boutons doesn't care...because he only hates America.



His views are worhless...he is pure bias and double standard.

Boutons posts are for entertainment purposes. After awhile, you just read them and all you can do is laugh.

[Extra Stout]

I'm asking questions. Please feel free to answer them or ask your boss to post.

btw, I rather sell one house for $1million then sell 10 houses for 100k.
I'd rather sell 10 houses for $150K each than one house for $1 million. I'll also pay some market forecasters a tidy sum to predict accurately whether I'll be able to sell those 10 houses for $100K or $150K so I know what my strategy should be.


If increasing the supply is what would make these companies the most money, and then why doesn't OPEC open up the spickets? You may want to ask your boss about that one too.
There is a basic economic concept called profit maximization. I'm not going to insult your intelligence by going along with this ruse of yours where you pretend not to understand that concept.

[xrayzebra]

I asked my boss why we don't cancel our capacity expansion projects and gave him your foolproof economic acumen as a reason. He rolled his eyes.

I saw in the paper this morning ES where the refiners are in for more hard times. Most don't know that most of the refiners are not owned by the OILCO's and that the price of oil is hurting them as well as the consumer.

I hope you all get your new stuff on line ASAP.
Valero is one of the prime owners of refineries in the U.S. Of course they kinda ripped their drawers with me many moons ago when they were Coastal States and he reneged on so many of their Gas contracts. And San Antonio cut a deal to stop litigation if they would move to San Antonio. Cant remember all the details, way back in the 70's.

[2centsworth]

Well, there are a lot of variables that could determine what impact increased Iraqi oil would have on the market, quality being one of them.

Remember, the price of oil you see quoted is for West Texas Intermediate (WTI) crude oil. There are a number of international benchmarks, this is the one we use in the US. Other crudes trade based on a discount or premium to WTI. For example, Mexican Maya crude has been trading for about $20 recently. That is $20 less than whatever WTI is. So now the Mexicans are getting $115/bbl as opposed to the $10-20 they were getting just a few years ago.

Most Iraqi crude is on the lighter end of the spectrum (even what they call "Basrah Heavy" is more like a medium grade in terms of gravity), but it is also more sour (heavier in sulfur content). Since crude oil have significant and distinct quality characteristics, it is different than most commodities. It is entirely possible (though not probable) that increase Iraqi crude production would have ZERO impact on WTI price, but would instead result in a widening of sour crude differentials (the discount sour crudes trade at).

Another important thing to consider about "BigOil" expanding their production, is that "BigOil" only controls about 10% of the global production of crude oil. So, incremental volume is important for them - and since all oil falls in price, but they only care about their own, then it increases profits. A 50% increase in volume for a single company is not a 50% increase in global supply (which is what the price is based on).

I haven't done the work to tell you one way or another if the increased supply would mean a BIGGER decrease in price (which would mean supply is elastic and total revenues would drop as a result - all else equal), but even if supply were elastic, it could still be profitable. Consider the following example:

Assume company "Scottoco" has leases in the Gulf of Mexico and can pump 1 MMBPD barrels of oil, which it can sell for $100/bbl on the open market with a cost to the company of $25/bbl (and a profit of $75/bbl). So right now my profit is $75MM/day (MM = million)

Let's say that Scottoco gets Iraqi contracts for another 1 MMBPD, which accounts for about 1.1% of global oil supply. For illustration, lets say this results in a 5% decrease in the price of crude oil. In this Iraqi oil field, it still costs me $25/bbl to extract.

So now I am selling my crude for $95/bbl, but I have 2 MMBPD at $70/bbl margin. That means my profit is now $140MM/day.

In this (extremely simplified), price would have to fall all the way below $62.50/bbl to have a NEGATIVE impact on oil supply. So, a 1.1% increase in oil supply would have to result in a 38.5% decrease in price. Not going to happen.

Remember, we need to consider the microeconomic approach to identify the incentive for individual companies, not the macroeconomic approach. If we assume that all oil sells for $100 before and $95 after, then yes, total revenues (and all else equal, profits) fall - but they INCREASE for the companies that increased their volume.

I'll leave the "reasons for invading Iraq" discussions to others.

Essentially, only time will tell for a schmo like me. I do tend to believe any significant increase in supply from IRAQ would spark the other suppliers to increase their inventories too. That would in turn make Supply Elastic. Small increase like the 200,000 barrells from the Saudies will have little impact, but I believe the IRAQi's have the resources to supply much more than just 200,000..

[xrayzebra]

Essentially, only time will tell for a schmo like me. I do tend to believe any significant increase in supply from IRAQ would spark the other suppliers to increase their inventories too. That would in turn make Supply Elastic. Small increase like the 200,000 barrells from the Saudies will have little impact, but I believe the IRAQi's have the resources to supply much more than just 200,000..

What you are saying about "others" increasing supply is very true. Cheating in OPEC is normally the norm.

I understand Nigeria is the cause of the last spike. They took about 2 hundred thousand off the world market. So Saudi's are just replacing Nigeria's.

[DarkReign]

Boutons posts are for entertainment purposes. After awhile, you just read them and all you can do is laugh.

You dont need to tell whottttttt that. I do believe they have met IRL. Im not certain.

[boutons_]

Total, TotalFinaElf, Elf Aquitaine...


Boutons doesn't give a shit what that company does...


It's done everything he accuses the American companies of attempting to do...to a far mroe genocidal and disastrous degree...


boutons doesn't care...because he only hates America.



His views are worhless...he is pure bias and double standard.

There he goes again. if you're a dissenter, you're a traitor.

Whott, tell us again your fairy tales about democracy and "winning" in Iraq, WMD, Saddam's role in 9/11, and his wonderful support for AQ! :lol

[scott]

Essentially, only time will tell for a schmo like me. I do tend to believe any significant increase in supply from IRAQ would spark the other suppliers to increase their inventories too. That would in turn make Supply Elastic. Small increase like the 200,000 barrells from the Saudies will have little impact, but I believe the IRAQi's have the resources to supply much more than just 200,000..

If only time will tell (as opposed to the long post I provided in response to your request), why bother asking?

If you want to believe that there is no profit incentive for individual oil companies to get incremental production out of Iraq because you believe that such incremental supply would reduce price so significantly, you are more than welcome... but you'd be extremely foolish to do so.

[RandomGuy]

Would you rather sell 1 house for $1 million, or 10 houses for $200k? Just becuse your supply increases ten-fold does not mean price decreases ten-fold.

Quantities and prices do not move by the same amount, is the answer to your question.

You are trying to explain particle physics to Mrs. Smith's special education class.

Commendable, but ultimately pointless.

[Gino]

That's not the fucking point now, is it? The whole pretext about the war on terror bullshit, and liberation of Iraq is completely blown. I won't argue Saddam was a ruthless dictator, but don't come here with that "true democracy installed" bullshit. You haven't installed shit. Iraq is in shambles. The minute the US gets out of there, what the fuck do you think is going to happen??

Of course, now that the US plans to have oil interests in Iraq, I doubt you will ever truly "leave". The only thing this war has proven is the US has carte blanche to do whatever they want.

My main concern here is the US has lost its moral high ground. What the fuck are you going to say if Russia decides to invade a neighboring country under the pretext of national security? In short, the US will lose its status as the peace keeper of the world, if it hasn't already.

You keep switching between "U.S" and "you" when talking about the U.S.

Do you refer to the Spurs as "we"?

[Brutalis]

Seriously, if this doesn't erase any doubt about why the US invaded Iraq, nothing will. The US has quickly lost all credibility as a global governing body. They do what the want, without repercussion. You've gone from stalwart representative of democracy to common thug in a matter of years.

Keep talking and we'll take your little shit country next!

[2centsworth]

If only time will tell (as opposed to the long post I provided in response to your request), why bother asking?

If you want to believe that there is no profit incentive for individual oil companies to get incremental production out of Iraq because you believe that such incremental supply would reduce price so significantly, you are more than welcome... but you'd be extremely foolish to do so.

From your post i read you left open the possibility that supply is elastic. Btw, economics is not a science.

[2centsworth]

You are trying to explain particle physics to Mrs. Smith's special education class.

Commendable, but ultimately pointless.

Please enlighten us how a genius like you justufies being on welfare when you were more than healthy enough to work. Oh wait, you're a punk and have me on ignore but také little pot shots.

[SRJ]

My understanding is that the volume of oil produced by nationalized oil has a much bigger impact on worldwide oil prices than commercial oil does. Am I wrong?

[scott]

From your post i read you left open the possibility that supply is elastic. Btw, economics is not a science.

I left open the possibility that, at current prices, supply is elastic on a macro level. All supply (and demand) of all goods is elastic at some price level (this is the mathematical law of elasticity, where the midpoint of the supply/demand curve in question is the inflection point at which supply/demand switches from elastic to unit elastic to inelastic).

What I also clearly stated (or so I thought) was that increased production would result in increased profits for any individual producer (the micro level).

But, I guess people read what they want to read.

And that economics is not a science is news to us economists.

[ElNono]

it's only a science if it ends in -ologist'

Like boutonsologist?

[PixelPusher]

And that economics is not a science is news to us economists.


it's only a science if it ends in -ologist'

For those economists savvy enough to recognize that economics is really just a branch of anthropology, it is indeed a science.

[2centsworth]

I left open the possibility that, at current prices, supply is elastic on a macro level. All supply (and demand) of all goods is elastic at some price level (this is the mathematical law of elasticity, where the midpoint of the supply/demand curve in question is the inflection point at which supply/demand switches from elastic to unit elastic to inelastic).

What I also clearly stated (or so I thought) was that increased production would result in increased profits for any individual producer (the micro level).

But, I guess people read what they want to read.

And that economics is not a science is news to us economists.

I understood you very clearly and you made excellent points. Thus, there was clearly an oil incentive as far as the bigoilcos are concerned.

My amateur economists sense tells me a significant increase in supply from IRAQ will backfire and we'll see prices plummet back to $1.5. It will spur a battle between the suppliers and they will flood the market just to keep pace.

[spurster]

http://cache.boston.com/bonzai-fba/Third_Party_Graphic/2008/06/25/1214446239_1840.gif

[boutons_]

Iraq throws open door to foreign oil firms

"By allowing international firms to help raise output at its key producing oil fields, the Iraqi government is breaking with the policy of major oil-producing neighbors such as Saudi Arabia, Kuwait and the United Arab Emirates where national firms keep tight control of foreign investment in their oil sectors."

" "The six oilfields that have been announced today are the backbone of Iraq's oil production," Oil Minister Hussain al-Shahristani told a news conference."

(aka, "To the Imperialistic Invaders, go the spoils of resource imperialism." )

"But Shahristani, showing frustration, said talks on deals that were supposed to quickly boost output at fields by utilizing the technical expertise of majors were still going on.

He said the firms were reluctant to sign the technical support contracts because they would offer their advice from abroad and preferred to be hands on with the fields."


" Iraq's cabinet agreed a new draft national oil law in February last year, but it has failed to get through parliament.

Baghdad has moved ahead with the contracts, saying this was in line with an old law in existence before the invasion"

( Iraqi democracy sounds pretty much like a dubya democracy. "Fuck everybody else in govt, I AM the government" )

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/30/AR2008063000205.html?hpid=topnews

==================

The US holds $50B in iraqi cash, used as a bludgeon to get the oil deals. Of course, the US/UK oilcos will take extremely good under-the-table care of Maliki and friends.

[smeagol]

Can you imagine if boutons was a twenty-something in a Latin American country during the 60s?

He would've been Che Botones . . .

[boutons_]

Whott can't handle the bitch-slapping truth I lay on him, so he calls me a lying whore.

I really, really yank Whott's dinky little chain.