Iraq Economic Policy

Just what Iraq needs, more angry people.  From The Economist:

THE queue of
angry motorists stretches for miles. Baghdad’s petrol stations are
drier this month than they have been since just after the American-led
invasion of Iraq in 2003. Some drivers wait for as much as 24 hours,
sleeping in their vehicles. When told that there is no petrol, some
have lost their tempers and started shooting. How, asks a furious
driver, can an oil-producing country run out of fuel?

Ask an
insurgent, and he will assure you that the American army steals the oil
for its tanks. Others might blame the lack of capacity at Iraqi oil
refineries or the fact that the insurgents keep blowing up the
pipelines. But the most important reason is that the government has
fixed the price of petrol at approximately zero–barely one American
cent a litre.

ShortageOfficials and
petrol-station owners with access to subsidised petrol have a choice.
They can do the proper, legal thing and give the stuff away. Or they
can let it leak onto the black market, where prices are between ten and
100 times higher. Or they can smuggle it out of the country where,
global oil prices being rather steep at the moment, it sells for a tidy
sum. Many have chosen the more lucrative options.

Iraqis may
imagine that their situation is unique, but it is not. Other oil-rich
nations, such as Nigeria, also have governments that try to keep petrol
artificially cheap and therefore suffer chronic shortages. Iraq has
additional supply constraints, however, in the form of fanatical

Thanks to David Theroux for the pointer.


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