The Oil Drum | DrumBeat: September 15, 2006

317 comments on DrumBeat: September 15, 2006

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davidsmi on September 15, 2006 - 11:10am

I guess the question would be what is behind the decrease in local consumption.

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Oil CEO on September 15, 2006 - 11:21am

I'm curious, too. I forget what Iraqis are supposed to get for a price on gasoline, but it was ridiculous. Like 25 cents a gallon or something. So people were using their quotas and then reselling the gasoline on the blackmarket or sending out of the country.

There was an excellent article on this in the NYT months ago. If you read the Brookings report, they actually track average waiting times in line at petrol stations.

One possible explanation is that the real price of gasoline in country is tending more towards the black market price. Possibly cutting demand.

Something else I'd like to bring up is that I think pipeline attacks in Iraq may be overblown, no pun intended. There is a website that actually tracks these listed in endnotes of Brookings report. I haven't read through the whole list, but I get the sense(and this is pure speculation)that the "players" have more interest in making money from the trade in oil/gasoline than in disrupting its flow. We've seen this before. Most notably in Gaza.

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odograph on September 15, 2006 - 11:47am

When you stay in your house, hiding from various gunmen (and electric drill wielders), that might cut down on driving.

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davidsmi on September 15, 2006 - 11:52am

Electric drills? The mind cringes at the thought. But seriously, these drills are only a danger during the four hours a day that they get electricity <wink>

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Oil CEO on September 15, 2006 - 11:57am

And only within range of the extension-cord.

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Squalish on September 15, 2006 - 1:09pm

Batteries: Bringing you 24 hours of mobile torture from 4 hours of stationary charging a day.

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Leanan on September 15, 2006 - 11:39am

IIRC, the Iraqi government was forced to raise prices. Eightfold, I think it was. Imagine gasoline going from $3/gallon to $24/gallon overnight. That would cut consumption, I daresay.

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davidsmi on September 15, 2006 - 11:43am

Eight fold? <sarcasm>I missed that announcement by the White House.</sarcasm> I dare say you are correct that such an increase would cut consumption.

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Oil CEO on September 15, 2006 - 11:46am

Unless you've got an AK-47. Then I imagine your power of persuasion would rise to the occasion. And you might even Consume More ;)

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Consume More on September 15, 2006 - 11:58am

Right you are!

Here's a Wa Post report on the Iraq gas price increase, from December of last year:

http://www.washingtonpost.com/wp-dyn/content/article/2005/12/27/AR2005122700929.html

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Oil CEO on September 15, 2006 - 12:04pm

Thanks, I owe you one. I knew you were out there. I was perfectly satisfied to sit around cracking jokes until someone came by with some facts. Or at least the Washington Post. Cheers.

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davidsmi on September 15, 2006 - 12:05pm

well, now I'm confused. If the price went up 8 fold last December, one would expect to see an immediate decline, yet January is a short term peak for local consumption and then consumption appears to descend gradually. Anyone care to hypothesize?

Could it be a sign of increasing povertization - each month more people being priced out - and not necessarily an immediate "consumer" decision to not purchase?

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capslock on September 15, 2006 - 12:22pm

Inflation has climbed to 70% in Iraq. A living hell there. Things really were better for them under Saddam.

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Oil CEO on September 15, 2006 - 12:24pm

I think there is a crossover and dilution of price/demand from black market to waiting in line for four hours to get a few litres.

Think about it. Let's say you could buy milk(or whatever you fancy) for 25 cents, but had to wait for between 1 and 4 hours in line to get a half gallon. Or you could buy the same half-gallon and as many as you wanted for $3 without any wait, on the black market(from Al-Sadr Brothers).

What would you do?

Then, let's say, one day, Maliki & Sistani Grocers raised the price of the official milk to $2. But you still had to wait the same four hours.

Now what would you do? Aaaah. Choices. Choices. Economics.

Of course, your wait in line would probably decrease for the $2 stuff, but the price of the $3 stuff might go up, and you may actually have to wait 15 minutes for it.

They have a term for this in the Middle-East. I forget the Arabic. But in English...it is "Market."

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Telumehtar on September 15, 2006 - 11:49am

I had read that it wasn't so much as a raising of the price as much as it was a stop to the subsidies they were providing. Essentially the gasoline subsidy was bankrupting the Iraqi government before its even off the ground.

What would happen to American gas prices if all subsidies stopped overnight?

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Leanan on September 15, 2006 - 12:06pm

They didn't stop the subsidy, they just reduced it.

Fuel prices are heavily subsidized in many developing countries. In many cases, this is causing severe budget problems for the governments in question.

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Telumehtar on September 15, 2006 - 12:16pm

Stop was too strong a word, agreed.

But from the Washington Post article and a few others I Googled through their news search, the Iraqi subsidy will take another bump if they are to meet the demands of the International Monetary Fund. Its probably going to see at least a doubling in coming months as they shift prices to ME norms.

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odograph on September 15, 2006 - 12:01pm

Imagine gasoline going from $3/gallon to $24/gallon overnight. That would cut consumption, I daresay.

Ah, but then you drop it to $20, and everybody thinks it's cheap, ans starts driving again ;-)

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xironman on September 15, 2006 - 3:32pm

I guess the question would be what is behind the decrease in local consumption.

People killed by brutal uncontrolled sectarian violence don't buy gas?

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Oil CEO on September 15, 2006 - 4:07pm

This is going to sound callous, but I think the numbers will support me. The deaths don't account for a large percentage of the population.

Second point. Iraq looks real dangerous when viewed from the car-bombing, suicide-bombing, IED viewpoint. But I ask this. And I'm not kidding. And I'm not trying to be an ass. I'm serious. I don't know your answer. And I don't know the answer.

Do you think Iraq would be safer with no Americans, no Civil War, and no sectarian violence? What if it was at peace?

Do you think 20 million Iraqis driving around in "freedom" at 100mph in those lovely shitboxes they own would be safe? With no traffic lights. And no cops.

Where were those magic traffic lights going to come from?

I could go on. You want me to?

I think the word we all better get to love is 'Transition.'

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xironman on September 15, 2006 - 4:32pm

You are right of course, by the numbers maybe a hundred to a hundred fifty thousand, not much I guess, unless one of them happens to be your mom. A lot more (any that can afford it) have run. I think we would be better off not trying to impose our view of life on them, just my opinion, put the money and manpower into something other than g-d-oil. Don't worry though, in the end it will be just like Vietnam, we will say they are ready to go it on there own and then a year later the whole thing will collapse. I just hope they are as forgiving as the Vietnamese.

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Oil CEO on September 15, 2006 - 4:56pm

Yeah, I hear you. I got mixed feelings, though. I grew up over there. I think about signing up every day. I'm pisser with languages. I'd end up interpreting for frontline Marines in Ramadi. I could save lives. I could get my balls blown off. Or worse. Choices. Maybe Dick Cheney is trying to impose something. Not me. I try and figure every day whether I'm worth anything. We're all gonna die. We're doomed. What if they're right about God. Well, shit, I gotta take that into account, don't I?

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xironman on September 15, 2006 - 5:06pm

Sorry CEO,

Do you know anybody personally that has fought in a war, I mean someone close? If you do talk to them about it. It is not as funny as you think.

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Oil CEO on September 15, 2006 - 5:29pm

My best friends are Vietnam combat vets. My grandmother trained WWII pilots. My grandfather piloted his B-17 to 3 crash landings on New Guinea never losing a crew member. I never met his brother. He disappeared flying over the Hump. My father's my hero, though. I won't tell you about him. War sucks. That's what I learned about that subject from my family.

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xironman on September 15, 2006 - 5:36pm

War sucks. That's what I learned about that subject from my family.

Sometimes you don't know which CEO you are talking to. I mean you always know the Dave you are talking to, but the CEO ... it's hard to tell. I will take it at face value and say we have found a point of agreement.

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Oil CEO on September 15, 2006 - 5:49pm

Yeah, sorry. I would have asked the same question of you. No big deal. I'm not sure where I was sounding funny. It probably just slipped out. Being in agreement is good, though. I apologize.

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fleam on September 15, 2006 - 6:18pm

Better look up the table of military MOS's and see if they've added "Keyboard Cowboy" first......

It takes guts to go over there.

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Pitt the Elder on September 15, 2006 - 6:09pm

Iraq looks real dangerous when viewed from the car-bombing, suicide-bombing, IED viewpoint....
Do you think Iraq would be safer with no Americans, no Civil War, and no sectarian violence? What if it was at peace?
Do you think 20 million Iraqis driving around in "freedom" at 100mph in those lovely shitboxes they own would be safe? With no traffic lights. And no cops.

In a word, yes.

Traffic in India is crazy, leading to a death rate of 221 per million people per year. (cite) It's a pretty high death rate in comparison to most places (about double the US's), so should make a good estimate of what Iraq's would be like.

Iraq has about 26M people (CIA World Factbook), suggesting they'd see an annual death toll of about 26*211 = 5500 on the roads. Right now, thay see that many dead every two months.

So, yes, it seems clear that Iraq would be much safer with no sectarian violence.

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oldhippie on September 15, 2006 - 7:54pm

Actually a significant part of the population has left the country. I've seen numbers ranging from 1 to 3 million. No reason to believe it at either end of the scale but lots of reportage.
Also, why would you believe the numbers you get on Iraqi production o rconsumption? Deems like a "lips moving" situation to me.

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