Article on Iraqi Oil in New Yorker magazine

The July 14/21 New Yorker carries “Beneath the Sand”, an article by John Cassidy on Iraqi oil.  According to the article, despite massive reserves production is very low due to a lack of investment in the 1980s and 1990s and recent looting (Iraqis have been stealing massive oil processing equipment and taking it over to Iran by boat then selling it for $50/ton as scrap steel).


Under the most optimistic assumptions it seems that Iraqi oil production will rise to 6 million barrels per day by 2010, which will be worth $55 billion/year at $25/barrel.  The population of Iraq meanwhile is expected to balloon to 30 million people by 2010.  So on a per-Iraqi basis the oil revenue would only be about $1500 per year.  If half of that money goes for the cost of production, as a return to investors who rebuilt the industry, plus maybe some payments on Iraq’s foreign debt, we’re down to $750 per capita.  Let’s assume that income is distributed as fairly as it is in the United States.  The bottom 40% of Iraqis would therefore receive 12% of the income.  I.e., a poorer-than-average Iraqi in 2010 could expect to receive perhaps $200/year or so in oil money or benefits derived from oil revenues.


Having Iraq cranking out lots of oil and holding down oil prices will be good for American SUV owners but even under the most optimistic assumptions it looks as though it won’t do much for the Iraqi in the street.

4 thoughts on “Article on Iraqi Oil in New Yorker magazine

  1. It turns out that the average schoolteacher in Maine, where there are no apparent economically-useful natural resources, makes more than even the average pre-Saddam Iraqi. (Who in turn makes 10 times what Iraqis did living under Saddam.)

    It turns out that being gifted the most important natural resource in the world did not make the Arabic world productive.

    It turns out that the economic growth of productive societies is more powerful than having a lifetime supply of free energy under your feet.

  2. Actually that’s not a bad deal for the average Iraqi. A poor Iraqi probably earns about 500-600 dollars per year. And if the $200 is a per capita figure then a poor Iraqi family could expect a $800-$1200 bonus check every year. Not bad at all. Ask the Alaskans how they feel about their oil checks.

  3. I think that you need to figure in that all that oil being produced means that there will be a need for oil services to maintain the equipment. Either Iraqis or expats, in either case spending money. Plus the need for local restaurants; local machine shops to make up custom parts; local grocery stores, etc. etc.

  4. Why would the oil wealth not be distributed in anything other than a flat manner? It’s not at all like a tax. Each Iraqi would be entitled to an equal share?

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