NCPA - National Center for Policy Analysis

Putting a Value on Liberty

March 26, 2003

President Bush has said on many occasions that Iraq's oil belongs to the people of Iraq and must benefit them, rather than Saddam Hussein and his henchmen. Its oil resources are very large -- second largest in the world after Saudi Arabia.

  • Analysts put Iraq's proven reserves at 112 billion barrel of oil, with as much as another 200 billion barrels yet to be discovered.
  • On top of this, Iraq has 110 trillion cubic feet of natural gas reserves.

Yet Iraq's oil production is very low at just 2.4 million barrels per day, which is mainly due to trade sanctions and low investment in Iraq's oil industry. Therefore, there is no question that Iraq could greatly increase its oil production once freed from sanctions and once the nation is open to foreign investment and the latest technology, says Bruce Bartlett.

It is hard to say what impact this might have on oil prices, but markets clearly expect lower prices.

  • On the eve of hostilities, oil was selling for about $37 per barrel, which means that at this price, Americans would be paying $270 billion per year for oil.
  • But once it became clear that Iraq's liberation was at hand, the price quickly dropped to about $28 per barrel, cutting our annual oil bill by $70 billion.
  • With full Iraqi production, the price might drop to $20 per barrel or less, giving us the equivalent of an annual tax cut of about $120 billion per year.

And this is a tax cut the entire world benefits from.

Source: Bruce Bartlett, "Putting a Value on Liberty," March 26, 2003, National Center for Policy Analysis.


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