🚗 🚙 Turn your trusty old car into trustworthy journalism Learn more

Losing money on oil in Iraq

Ashley Milne-Tyte Sep 28, 2006

KAI RYSSDAL: Oil hit $63.75 a barrel at one point today. There are murmurs of an OPEC production cut to stop the slide in prices we’ve been seeing, and maybe bump up cartel profits, too. In Iraq, they should be so lucky as to get any profits. A U.S.-govermment audit out today says Iraq’s oil industry has lost as much as $16 billion over the past two years. You can guess the reasons. Insurgent attacks, corruption and equipment that’s way below par. Ashley Milne-Tyte reports.

ASHLEY MILNE-TYTE: Oil analysts say those big losses aren’t so surprising in the light of high energy prices, and the fact that Iraq is exporting 200,000 barrels a day less than it did before the war. But David Kirsch of PFC Energy says things could get worse:

DAVID KIRSCH:“We’re actually forecasting going forward a significant drop in Iraqi production, which will also come with a significant drop in exports and revenues. So this $16 billion may just be the tip of the iceberg.”

The irony is Iraq has to import petroleum to provide for its own citizens’ needs. Robert Ebel of the Center for Strategic and International Studies says not all of that stays at home:

ROBERT EBEL:“So they import petroleum products at a very, very low price, then quite a bit of that volume is reexported because you can sell it outside the country and make a goodly profit.”

But Iraq wants to get back to making a profit from its own exports. David Kirsch of PFC Energy says the problem isn’t just attacks on pipelines. It’s politics, and the current Iraqi oil minister:

KIRSCH:“He doesn’t have the same type of backing in some of these sort of backroom deals, let’s say, or you know just the politicking among the various ministries that you’ve seen in the past that the oil minister would bring to the table.”

Iraq and China may be about to strike a deal to develop Iraqi oil resources. Kirsch says that could be a boon for Iraq, since China is known for providing its own security at oil facilities.

In New York I’m Ashley Milne-Tyte for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.