A Crude
Look at Iraq’s Wealth
Iraq is a
wealthy country and every Iraqi is a present value millionaire as wealth in the
world shifts toward the owners of crude oil.
Over the next
two decades, total world energy consumption will almost double and serious
alternatives to oil energy are decades away requiring. In the US, oil consumption is expanding, oil
production is declining, and imports are climbing. Oil prices and the energy share of GDP will
certainly increase over the next 50 years.
The energy bill
will have to be paid with profits going to the owners of energy resources. Owners of the oil reserves will profit as the
price of oil rises due to increased scarcity.
Oil extraction and refining are very competitive with profits slightly
higher than the average industry but with high risk.
The price of a
barrel of crude oil now ranges from $35 to $150 with extraction cost in the
Middle East under $5. The owners of the
oil get the difference. Extraction costs
are rising but much slower than the price of oil.
The Arab Gulf
has 65% of the world’s proven oil reserves and Iraq has 12% of the world proven
reserves. Oil in the ground is like
money in the bank making the Iraqis wealthy.
Iraq can easily
produce 6 million barrels of oil a day which is 2 billion barrels per
year. At $50 per barrel, that oil would
sell for $100 billion. The population of
Iraq is 24 million and that oil income translates to $4000 per person every
year.
For some crude
idea of the wealth if Iraq, suppose Iraq sells a quarter of its potential
reserves at an average price of $50 per barrel over the next 20 years. That would generate 90 billion x $50 = $4.5
trillion. If the population of Iraq
grows to 30 million, that would be $150,000 per capita for 20 years, or $7,500
annual per capita income.
Estimated
productive assets in the
The total value
of Iraq potential oil reserves at an average profit of $75 per barrel over next
100 years would be 360 billion x $75 = $27 trillion or $900,000 per capita,
making every Iraqi a millionaire. These
calculations do not include natural gas revenue, lately about equal to oil
revenue for producing fields.
In the entire
Arab or Persian Gulf, proven oil reserves are 195 trillion barrels. Selling this at an average profit of $75 per
barrel over the next 100 years would generate $15,000 trillion income. If half of that is invested, it would amount
to $7,500 trillion or a quarter of the present total productive assets in
world.