Air Date: Week of March 21, 2003

Although Iraq lags as an oil producer, its petroleum reserves are the second largest in the world, valued at more than $4 trillion dollars. Critics of the Bush Administration say oil is a motivation for war with Iraq. But according to John Maggs, staff reporter of the National Journal, it’s not that simple. Host Steve Curwood talks with Maggs about his article, "The Matter of Oil," published in the magazine’s current issue.

Transcript

[THEME MUSIC]

CURWOOD: Welcome to Living on Earth. I'm Steve Curwood.

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CURWOOD: At any anti-war protest these days, from Boise to Berlin, you're likely to see signs declaring "No blood for oil," or "We don't want your oil war." The sentiments are a testament to the belief held by many that President Bush and the other former oil men in his administration are waging war against Iraq largely motivated by their desire to control its oil, if not outright, then by putting in place an Iraqi regime that would dramatically increase production. That, in turn, would break OPEC's monopoly and spark an international price war leading to reductions at the pumps that would ultimately benefit U.S. consumers.

But reporter John Maggs says it's not that simple. He writes about this “Matter of Oil” in the current issue of the National Journal, and he joins me now from his office there in Washington, D.C.

CURWOOD: John, you say there are two different answers, really, to the question is it all about oil. What exactly do you mean?

MAGGS: Well, the way that it is about oil is that all U.S. policy and U.S. interest in the Middle East is about the fact that it's the place where all of the oil is. So, it's hard to take oil out of the equation.

CURWOOD: What's the part that says it isn't about oil?

MAGGS: Well, unlike a lot of countries, such as Saudi Arabia and Mexico and, in fact, Iraq itself, the U.S. government is not in the oil business. So, in a direct way, they really couldn’t control the oil and produce it and get it to market because they don't know how to do it and they don't have the resources to do it.

Now it could be possible, I suppose, for the U.S. to divert that oil to U.S. oil companies. And it's true that George W. Bush and Vice President Cheney and others in his administration have been involved with the oil industry and some suspect that there might be some kind of back channel of communications going on there. But the truth is that producing oil in another country and getting it to market is a lot more complex than simply going in and signing over the oil fields, and it's going to take a lot of expertise and a lot of investment. And it's not even clear that the U.S. industry is willing to make that investment. They haven't in the past.

CURWOOD: Now, there's yet another theory. This one is based around oil prices and even presidential politics here in the United States. And basically, this one goes, look, if the U.S. can release the stranglehold on Iraqi oil, production will go up, prices will go down, and in the end it will trickle down to U.S. consumers and business in the form of lower oil prices just in time for the 2004 elections.

But looking at your article, John, you write “but if the administration cares about the state of the economy on Election Day, confronting Iraq couldn't have been a worse idea.”

MAGGS: Well, talking about what's happened up till now, confronting Iraq has driven oil prices up to nearly $40 a barrel, and it's probably been a major factor for why the United States has had slow growth over the last six to nine months.

When you look past the war to when oil prices come back down again, it's hard to see how, even between now and 2004, enough of a gain could be made to make up for all of the losses of the last six to nine months. And if you look at oil prices, they're completely related to the escalation of the war rhetoric. So it certainly hasn't helped the U.S. economy so far, and it's not clear that it's going to be able to help the U.S. economy post-Saddam to make up for the damage that's been done.

CURWOOD: When you wrote your piece in the National Journal, you said that it's not really about oil, the war, but as soon as the war is over it's all about oil. What did you mean by that?

MAGGS: Well, it's certainly going to be all about oil as far as getting Iraq back on its feet and rebuilt. The country has no resources and not much of an economy beyond the oil industry. Paying the billions of dollars it will take to rebuild that country will require the orderly operation of the oil industry. And that's one of the strongest arguments for why it's very unlikely that the United States would seek to somehow change ownership or divert its oil resources. There's an Iraqi national oil company that's probably the strongest and best-run institution in Iraq, and they're going to be the ones that are going to have to retain control of the oil and get oil wells back on-line and producing, so that that money for reconstruction will be there.

CURWOOD: One of the things we hear from the national environmental groups and others is that, look, if the U.S. would only be more energy-efficient it wouldn't have to rely so much on the Middle East for oil, and then the U.S. wouldn't have to fight wars like this one. But you report that the U.S. actually has gotten much more efficient, even since the Gulf War in 1990.

MAGGS: That's right. What's happened over the last 10 or 15 years is that the economy itself has become much more oil-efficient. In 1990 the United States burned 17 million barrels of oil a day, and that was to run an economy that was $5.8 trillion dollars in size. That amounts to about $934 dollars of output for every barrel of oil. But in 2002 the U.S. economy burned only a bit more oil, 19 million barrels a day, but that was to run an economy that had grown to $10.4 trillion dollars in size. That's about $1500 dollars in output per barrel of oil, a 50 percent gain from 1990. So we've become a lot less dependent on oil for every dollar of output.

CURWOOD: John, I'm still a little puzzled. On the one hand, this region is all about oil, and on the other hand, your analysis concludes that this particular war is not about oil.

MAGGS: Well, I would say that the oil economy, and the way oil figures into the working of the world economy, is such that you could say that the forces go far beyond the abilities of governments to influence them. And the example I would use is the fact that just in the last three or four months, because of events in the oil economy, in particular, because of some shortages of oil that the U.S. normally gets from Venezuela, the United States has become, by far, the largest importer of Iraqi oil.

It's a completely free and unfettered market, decisions are not made for political reasons, and ultimately, I think that's why no one like the United States could seize Iraq's oil resources and divert them in some way. It's a much too globalized and market-driven economy.

CURWOOD: What about the argument that the United States needs to go into the Middle East to keep the oil economy functioning?

MAGGS: Well, it's much easier to see that the United States is going to Iraq to promote the security of the Middle East as the source of the oil that we use every day. It's a lot harder to see how the United States might seize control of that oil, as some suspect.

CURWOOD: John Maggs is a staff reporter with the National Journal. His article "A Matter of Oil" appears in the current edition of the magazine. Thanks for being with me today.

MAGGS: My pleasure.