U.N. sanctions and then general instability prevented Iraq from reaching its full potential as an oil exporter. If Iraq became a democracy and increased oil output, it would strategically benefit the free world in great ways.
Now, don’t misunderstand me. I don’t believe that the U.S. wanted oil companies to pillage Iraq.
At any rate, that didn’t happen. A Russian company, LukOil, won the rights to major oil fields–not exactly the result of an evil American campaign to steal Middle Eastern oil. That doesn’t change the strategic and economic benefits for the U.S., though:
LUKoil, which won big at Iraq’s weekend oil auctions, expects a “revolution” in world oil markets when enough crude to add 20 percent to global supply starts to flow from the country’s supergiant fields.
LUKoil shareholder Leonid Fedun said Monday that he expected a fivefold rise in Iraqi production to cap oil price growth, while also deterring investors from pursuing more difficult and costly projects.
“A top manager at a leading Western firm said the modern history of the oil business will be split into the pre-Iraq and post-Iraq periods. I agree,” Fedun said in an interview.
Iraq has deals on the table to raise oil capacity to 12 million barrels per day from its current 2.5 million bpd, a level that would eclipse Russia and leave the country behind only Saudi Arabia.
This isn’t just hubris from an excited company wanting investors.
The Iraqis are open about their desire to produce 12 million bpd in ten years. You can’t have too many pro-American sources of oil, and this reduces our reliance upon Saudi oil.
That means Saudi Arabia can be pressured and gives us some more room to breath over instability in the Kingdom and the possibility of attacks on their oil infrastructure.
The increased supply also means oil prices can come down unless Iraq works with other OPEC countries to fix prices.