Iraq Has Obama—and America--Over a Barrel

Iraq Has Obama—and America--Over a Barrel

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Americans are still wondering: what is our strategic interest in Iraq? In a recent New York Times/CBS survey, only 23 percent of those asked said that President Obama has “clearly explained” our goals in the war-torn country.

As our Commander in Chief struggled to answer that question at his recent press conference, he couldn’t quite bring himself to admit the obvious – it’s all about the oil. Yes, a peaceful Iraq is helpful to keeping a lid on sectarian outbursts in the region, but so is a peaceful Syria – where we have notably remained on the sidelines. Obama alluded vaguely to “energy” two or three times during his remarks, but “oil” to our Green President remains a dirty word. 

What makes Iraq special is that the country is one of few with the potential to increase significantly its oil output – a potential that will not be realized if the country descends into civil war. Even with ongoing sectarian violence, Iraq’s production is scheduled to rise.

Related: How the Collapse of Iraq Would Affect America

Nearly all of the additional oil needed to fuel global growth between today and 2019 is expected to come from the U.S., Canada and Iraq. That’s according to the most recent report from the International Energy Agency, which is forecasting that by 2019, the world’s appetite for oil will jump by more than 7 million barrels per day (mb/d) over last year’s level– an increase each year of roughly 1.3 percent.

In 2019, consumers around the globe will be burning over 100 mb/d of oil, for the first time in history. In another first, demand from developed countries will be topped by usage in countries like China and India that are growing more rapidly.

Where will that new oil come from? Oil producers will lift capacity over the next several years by 9 mb/d; Canada and the U.S. combined will increase output by about 4 mb/d, contributing the lion’s share. Iraq will add an extra 1.2 mb/d, or some 60 percent of the OPEC total. More consequential to President Obama, and to the U.S., Iraq’s government is targeting production of more than 9 mb/d by 2020. 

That forecast is undoubtedly overly optimistic because of political and security issues, but reflects the enormous potential of Iraq’s giant oilfields. Oilfields that the rest of the world hopes will help keep prices from skyrocketing as demand continues to build and older fields in places like the North Sea and Mexico go into decline.

Related: The Need for U.S. Special Forces in Iraq

We need to protect Iraq’s oil. Analysts at International Strategy & Investment Group forecast that oil will reach $115-120/bbl at the end of this year “even without a supply disruption from Iraq.” Heaven knows where oil will go if Iraq collapses. Despite the popular view that it won’t matter which government is in power, someone will want to produce the oil – the truth is that continued conflict in the country will delay new fields being brought on stream and prevent oil companies from undertaking needed investment.

(In Libya, for example, production continues to run at about 10 percent of historical levels due to widespread upheaval.)

Even the recent Iraqi elections produced enough uncertainty that oil companies delayed concluding new service contracts. A major pipeline carrying crude oil to Turkey, located in the violence-torn Anbar Province, has been out of commission for some time; getting it back in operation remains uncertain. Also, if an unfriendly pro-Iran government takes over, the west might move to impose sanctions – like those that have affected Tehran’s oil exports.

Iraq has President Obama is over a barrel. To secure long-term oil supplies – and to prevent Americans paying a lot more at the pump -- he will need to either step more firmly into the political bear-trap, or commit to much more aggressive oil and gas development in the U.S. and Canada.

The U.S. has unexpectedly emerged as a major player, now producing over 11 million barrels of oil daily, topping Russia and Saudi Arabia. The ability of oil companies in the U.S. to tap tight shale formations has exceeded expectations (and proved an unexpected boon to the oil-unfriendly White House) by a wide margin, but forecasters expect growth to plateau by the end of the decade.

The gains in U.S. production have come in spite of, not because of, the Obama administration. Between 2009 and 2013, oil production on private and state lands soared 61 percent; on federal lands, output slid 6 percent. During the same period, natural gas production actually dropped 28 percent on federally leased land; elsewhere it increased 33 percent.

Related: Iraq: We Broke It, but We Can’t Fix It

One indication of how resistant the White House has been to encourage our energy industry is that the government only approved 3,770 drilling permits last year, down from more than 7000 in 2007, for instance. If you can’t drill, you can’t find oil or gas.

Fueling global growth and forestalling a hike in oil prices will require a commitment either to Iraq or to U.S. energy development from the Obama White House. Here at home, it will mean new investments and postponement of environmental regulations such as those just proposed by the EPA to limit carbon emissions. 

Obama should act on his words – embracing the “all of the above” strategy that could provide meaningful incremental energy to North America. He should give the go-ahead for the Keystone XL Pipeline, which would help ramp up production of Canada’s vast oil sands, reignite our aging nuclear program, dial back the anti-coal regulations that will siphon more of our natural gas to power production, green light expanded LNG exports and speed up leasing of federal lands for oil and gas exploration.

None of that is easy politically for the president. His backers in the environmental lobby, funded by the likes of billionaire Tom Steyer, are pushing hard for a green agenda that will drive up electricity and gasoline prices in the U.S. That is not in our, or the world’s, best interests.

The question for President Obama: which is a tougher adversary – ISIS or Tom Steyer?

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