Can Troop Increase Stabilize Iraqi Oil Industry?

As President Bush prepares to send over 20,000 more U.S. troops to Iraq, one question being asked is--will the escalation jumpstart the country’s oil industry? The question centers on Iraq’s vital oil trade stabilizing in the midst of a bloody war. On “Street Signs,” two guests talked about the Iraq oil situation--Michael Makovsky of the Bipartisan Policy Center and David Kirsch of PFC Energy.

Makovsky believes that Iraq’s oil output could actually triple to 6 million barrels per day if the country is more stabilized. Iraq currently produces about 2 million barrels per day. Makovsky notes that 6 million is the numbers the Iraqis use – and used under Saddam Hussein – as their optimal output. And he thinks they can reach that goal, but possibly not for another “5 or 7 or 10 years” depending on the stability of the country.

If the troop escalation does indeed help create stability, the oil investors should follow – although Makovsky says the Iraqis must take the lead on securing their oil infrastructure from the insurgency. He also says the industry is currently “woefully underinvested.”

David Kirsch says other than the obvious security problems in the country, international oil companies are not going to invest until the country’s legal system is secure. When the security of contracts is equal to the security of the country itself, then oil companies might start bidding on Iraq’s vast oil reserves, Kirsch says – but 6 million barrels of oil per day is likely to happen “when pigs fly.”