Iraq Economic Policy

Just what Iraq needs, more angry people.  From The Economist:

THE queue of angry motorists stretches for miles. Baghdad's petrol stations are drier this month than they have been since just after the American-led invasion of Iraq in 2003. Some drivers wait for as much as 24 hours, sleeping in their vehicles. When told that there is no petrol, some have lost their tempers and started shooting. How, asks a furious driver, can an oil-producing country run out of fuel?

Ask an insurgent, and he will assure you that the American army steals the oil for its tanks. Others might blame the lack of capacity at Iraqi oil refineries or the fact that the insurgents keep blowing up the pipelines. But the most important reason is that the government has fixed the price of petrol at approximately zero—barely one American cent a litre.

Officials and petrol-station owners with access to subsidised petrol have a choice. They can do the proper, legal thing and give the stuff away. Or they can let it leak onto the black market, where prices are between ten and 100 times higher. Or they can smuggle it out of the country where, global oil prices being rather steep at the moment, it sells for a tidy sum. Many have chosen the more lucrative options.

Iraqis may imagine that their situation is unique, but it is not. Other oil-rich nations, such as Nigeria, also have governments that try to keep petrol artificially cheap and therefore suffer chronic shortages. Iraq has additional supply constraints, however, in the form of fanatical saboteurs.

Thanks to David Theroux for the pointer.