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The Padlet must contain:

●      Title, Group members, Tutorial Class

●      Basic outline of project paper (e.g. Introduction, Issue #1, Issue #2, Conclusion)

●      At least 3 key points / main topics to be covered

●      At least 3 supporting research papers / news articles / any other relevant material (link or citation) to support each key point or case study

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1. Introduction
1.1 Background of Iraq

1.2 Iraq Economic Changes from 1990- 2020

1.3 Iraq Oil Reserves

2. Main issues

2.1 Distribution of revenue earned from oil

2.3 Corruption and Waste

3. Conclusion

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Oil-rich countries in the Middle East (i.e. Saudi Arabia, Bahrain, Iraq, Iran, Syria, Kuwait, Qatar, the UAE, Oman, and Yemen) have a natural resource that many other countries do not.

Pick ONE of these countries and research on the history of their economic growth and development in the last 3 decades (1990-2019), giving your opinion on whether the abundance of oil has been a blessing or a curse.

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On 21st April 2020, price of oil has plunged to -$37.63. And in 2020, the oil industry contributes to 97.1% of  Iraq’s exports while the gems and precious metals and fruits and nuts contribute to 2.1% and 0.1% of Iraq’s exports respectively. This shows that the oil plays an important role in determining the country’s balance of payment. With the recent Covid-19 pandemic, it has caused huge financial trouble to Iraq. The drop in price is due to Covid-19 which caused a standstill in the world’s economic production. Thus, the demand for oil exports from Iraq is low as production comes to a halt.

The country typically exports around 3.5 million barrels per day. Even with the huge drop in oil prices, Iraq’s oil production has only dropped roughly 800 BBL/D/1k. Many oil companies in Iraq are not stopping their oil production as the costs incurred when halting the production will cost more than if the company continues to produce oil. Thus, there was not a huge drop and it will continue to rise again.

Having an abundance of oil to export, creates a surplus in Iraq’s current account. However,due to the plunge in the price of oil, the export value of oil has dropped by alot. As compared to the value of Iraq’s imports, it did not drop as much as the exports. The value of its imports was less affected by Covid 19 as compared to the oil value since the majority of its imports are machineries, jewelleries and cars. Thus, leading to the current account deficit which they are facing.

Based on the current account to GDP graph, the current account to GDP of Iraq has dropped from a surplus of 4.90% in 2018 to -1.20% in 2019. It is estimated that Iraq will need to use approximately $60 billion from their reserves to cover the deficit.

Related Articles/Materials:
1. https://www.aljazeera.com/ajimpact/oil-price-crash-compounds-problems-facing-iraq-government-200506232414949.html

2. https://oec.world/en/profile/country/asirq#:~:text=Product%20Imports,-%23permalink%20to%20section&text=The%20most%20recent%20imports%20of,Refined%20Petroleum%20(%241.62B).

3. https://tradingeconomics.com/iraq/current-account-to-gdp

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One oil price went negative on Monday, signaling that there is no place to store all the crude the world is producing but not using.

U.S.-led

invasion

of Iraq

2003

U.S.-led

invasion

of Iraq

2003

Something bizarre happened in the oil markets on Monday: Prices fell so much that some traders paid buyers to take oil off their hands.

The price of the main U.S. oil benchmark fell more than $50 a barrel to end the day about $30 below zero, the first time oil prices have ever turned negative. Such an eye-popping slide is the result of a quirk in the oil market, but it underscores the industry's disarray as the coronavirus pandemic decimates the world economy.

Demand for oil is collapsing, and despite a deal by Saudi Arabia, Russia and other nations to cut production, the world is running out of places to put all the oil the industry keeps pumping out - about 100 million barrels a day. At the start of the year, oil sold for over $60 a barrel but by Friday it hit about $20.

Prices went negative - meaning that anyone trying to sell a barrel would have to pay a buyer $30 - in part because of the way oil is traded. Futures contracts that require buyers to take possession of oil in May are expiring on Tuesday, and nobody wanted the oil because there was no place to store it. Contracts for June delivery were still trading for about $22 a barrel, down 16 percent for the day.

"If you are a producer, your market has disappeared and if you don't have access to storage you are out of luck," said Aaron Brady, vice president for energy oil market services at IHS Markit, a research and consulting firm. "The system is seizing up."

Refineries are unwilling to turn oil into gasoline, diesel and other products because so few people are commuting or taking airplane flights, and international trade has slowed sharply. Oil is already being stored on barges and in any nook and cranny companies can find. One of the better parts of the oil business these days is owning storage tankers.

"Traders have sent prices up and down on speculation, hopes, tweets and wishful thinking," said Louise Dickson, an oil markets analyst at Rystad Energy, a research and consulting firm. "But now reality is sinking in."

The world has an estimated storage capacity for 6.8 billion barrels, and nearly 60 percent is filled, according to energy experts.

Some of the oil glut is evident in Cushing, Okla., a critical storage hub where the oil that trades on the U.S. futures market is delivered. With a capacity to hold 80 million barrels of oil, Cushing has only 21 million barrels of free storage left, according to Rystad Energy, or less than two days of American production. As recently as February, Cushing was not even up to 50 percent. Now, experts say it will be filled to the brim in May.

Storage is almost completely filled in the Caribbean and South Africa, and Angola, Brazil and Nigeria may run out of warehousing capacity within days.

In his news briefing on Monday, President Trump said the government was "looking to put as much as 75 million barrels" into the Strategic Petroleum Reserve, which is used as a buffer during crises and was created after the 1973-1974 oil embargo.

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For the first time ever, U.S. oil prices turned negative on Monday and some sellers had to pay buyers to take their fuel. Credit... David Mcnew/Agence France-Presse - Getty Images

The reserve has about 635 million barrels of oil, and is equipped to store 75 million barrels more. But the reserve can take only about 500,000 barrels a day.

Congressional Democrats recently balked when the administration proposed spending $3 billion to fill the reserve as part of the stimulus package lawmakers passed last month. But on Monday Representative Lizzie Fletcher, a Houston Democrat, said she would introduce legislation appropriating funds for a reserve purchase.

But it will be hard to quickly fix the oil industry's problems. The oil infrastructure is complicated and it's not easy to turn off the taps. In addition, countries like Saudi Arabia and Russia, whose economies are reliant on oil, only reluctantly cut production.

Shutting down oil wells and then restarting them when demand returns can require expensive manpower and equipment. Fields do not always recover their former production. In addition, some oil companies keep pumping, even if they are losing money, in order to pay interest on their debts and stay alive.

The huge drop in prices on Monday was exaggerated by the way oil prices are set.

When traders sell oil they guarantee delivery at a future time. Normally the price differences between oil for next month and the following one are relatively minor. But on Monday oil to be delivered next month, or May, was essentially deemed worthless. Oil set for delivery in June also fell but not nearly as much - more reflective of the market's view on the current value of crude.

Brent crude, the oil price benchmark outside the United States used by much of the world, whose May contract has already expired, fell about 5 percent to a little under $27 a barrel.

The disparities showed a market "undergoing extreme stress," said Antoine Halff, a founding partner of Kayrros, a research firm. "It's a sign of the very real imbalance between supply and demand."

A little over a week ago, there was some optimism in the oil industry. The Organization of the Petroleum Exporting Countries, Russia and other producers said they would cut 9.7 million barrels a day of production, or about 10 percent of global oil output, the largest cut ever. It was a grim acknowledgment that global demand had collapsed.

But that record cut will not be nearly enough. Analysts expect daily oil consumption to fall by as much as 29 million barrels in April, about three times the cuts pledged by OPEC and its allies, and May isn't expected to be much different.

"It's relatively impressive in terms of the overall number, but it's not enough to tighten the market between now and the fourth quarter of 2020," David Fyfe, chief economist at Argus Media, a commodities pricing firm, said about the cut by OPEC and its partners.

U.S. oil producers are also reducing production, but not rapidly enough. At the current pace, American production will decline to less than 11 million barrels a day by the end of the year, from 13.3 million barrels a day at the end of 2019.

Many companies are already reporting substantial losses, and experts said businesses across the oil patch will have to seek bankruptcy protection in the coming months.

Halliburton, the giant provider of equipment, workers and services to oil companies, on Monday reported a $1 billion loss in the first quarter, in contrast to net income of $152 million in the same period a year earlier.

Gary Ross, chief executive of Black Gold investors, an oil trading firm, said demand was falling so fast that U.S. companies that recently were exporting oil are now cutting production.

"It doesn't matter whether it is $15, $10 or $8, you are still going to" stop production, Mr. Ross said. ConocoPhillips, one of the largest U.S. oil companies, said last Thursday that it would temporarily curtail about 225,000 barrels a day of production.

Such cuts should help stabilize the markets, but it might take months. The U.S. contract for oil delivered in May 2021 was trading on Monday at about $35 a barrel, hinting at how long it might take for prices to reach levels they were at just a few weeks ago.

The oil industry's plight is forcing policymakers to consider intervening more forcefully.

And on Tuesday, the Texas Railroad Commission, which regulates oil and gas drilling, will take up a proposal for a 20 percent statewide production cut on Tuesday. The commission used to regularly manage oil production but hasn't done so since the early 1970s.

Exxon Mobil and other large companies have opposed mandated cuts but some smaller companies want the commission to act.

Scott Sheffield, chief executive of Pioneer Natural Resources, told the commission at a hearing last week that if the oil price stayed around $20 a barrel for a while, 80 percent of the hundreds of independent oil companies in the state would be forced into bankruptcy and 250,000 workers would lose their jobs.

At $30 a barrel, many companies would be "crippled," Mr. Sheffield said. "But at least the industry will survive."

Katie Rogers contributed reporting.

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Too Much Oil: How a Barrel Came to Be Worth Less Than Nothing

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One oil price went negative on Monday, signaling that there is no place to store all the crude the world is producing but not using. U.S.-led invasion of Iraq 2003 U.S.-led invasion of Iraq 2003 Something bizarre happened in the oil markets on Monday: Prices fell so much that some traders paid buyers to take oil off their hands.

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Due to Iraq’s oil abundance, petroleum sales account for around 90% of the government’s revenue as of 2016. However, mismanagement of funds alone has led to about US$60 billion of the US$99 billion budget going to areas like state employee wages and subsidies for failing state-run companies instead of using the funds for the rebuilding of infrastructure and investment in education, hindering economic progression.

Ironically, even though Iraq has large reserves of petroleum and natural gas, it still needs to import fuel and natural gas from other countries in the world. This unusual situation is due to state-run natural gas powered stations burning roughly 1.9 billion cubic feet of gas annually due to obsolete technology, forcing it to import natural gas from neighbouring Iran at a cost of US$4 billion annually to produce the demanded amount of power by the population. Oil refineries are largely destroyed or dilapidated due to internal civil wars and resulting in Iraq being unable to produce enough fuel for domestic consumption. This forced Iraq to spend US$5 billion annually to import fuel. Iraq’s subsidies on fuel has also raised demands, causing shortages and forcing people to purchase on the black market at exorbitant prices and fueling corruption. All these could be avoided if Iraq had not mismanaged funds and had invested part of its annual budget to rebuild infrastructure.

Corruption is another factor hindering Iraq’s economic progression despite large reserves of oil and natural gas. Black markets thrive due to the mismanagement of funds by the Iraqi government as the government is unable to meet demand for resources such as fuel. Reports have suggested that criminal networks including government officials and high-ranking religious figures are involved in the smuggling of oil into such black markets, making large amounts of profits in the process. This further reduces the amount of oil exported or refined, potentially costing the government billions in the process.

Another instance of corruption in Iraq is through an old program called “Oil-for-Food” by the United Nations during the Saddam Hussein regime. This program was enacted in the 1990s through Saddam Hussein’s demise in 2003 to enable Iraq to continue exporting oil in exchange for food and medicine due to the large amount of sanctions imposed on Iraq after the Gulf War. However, a large amount of these supplies were corrupted by government officials leaving very little to the population. After Saddam Hussein’s demise, sanctions against Iraq were largely lifted as Iraq was under the military control of the Allied Forces, mainly the United States. The period of military occupation was when foreign drilling companies, mainly American companies, were able to exploit Iraq’s vast reserve of oil and American firms were estimated to have profited at least tens of billions of dollars during this period. This was due to American firms paying bribes to then-government officials in exchange for extremely profitable deals. The deals included Iraq paying highly inflated sums to these American drilling firms to drill oil wells for the extraction of petroleum in Iraq’s oil firms. The actions cost Iraq billions in dollars and hindered its economic progression.

Related Articles/Materials

1. https://nationalinterest.org/feature/mismanagement-killing-iraq-15991

2. https://www.ganintegrity.com/portal/country-profiles/iraq/

3. https://www.globalpolicy.org/political-issues-in-iraq/oil-in-iraq/50768--iraqi-oil-transparency-and-corruption-.html?itemid=id

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Group Members: Aaron Tan, Jovan Tan, Matthew Tan, Darius Ong, Lewis Lew, and Wesley Yu (S10177349J)

Tutorial Group: TI03

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Issue #1 (Distribution of revenue earned from oil)

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Issue #1 (Distribution of revenue earned from oil)

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With the abundance of oil in Iraq, it is said that Iraq will account for 45% of global supply growth of oil in the next two decades. This will make Iraq the next Saudi Arabia figuratively.

Iraq's exports might triple in amount from the abundance of oil, potentially amounting to more than 6 million barrels a day by 2035 from the current amount of 2.6 million barrels a day.  Iraq will surpass Russia and become the second-largest oil supplier to the entire world, along with becoming the sixth-largest exporter of natural gas, surpassing Qatar as a result. With the increasing amounts of exports, Iraq may potentially be earning near $300 Billion a year by 2035, and have the GDP Per Capita of Saudi Arabia, which is 22,533.26 USD.

With Iraq potentially having a high amount of GDP Per Capita in the future, it can be said that the country will be rich and wealthy. With such a high level of wealth, many countries such as the United States of America have suggested Iraq to distribute its wealth to the people and citizens of the country. However,  the Governing Council and higher ups in Iraq are reluctant and refuse to distribute the wealth, as they want to use the country's finances and resources on other aspects such as healthcare and education. As such, their current GDP Per Capita is a low USD5955.

However,  slow economic growth, poverty, corruption, and violent conflicts such as Civil Wars are consequences of not distributing the country's resources with the people.

Related Articles/Materials:
1. https://qz.com/13345/iraq-will-flood-the-global-oil-market/

2. https://www.nytimes.com/2003/09/10/world/struggle-for-iraq-iraq-s-wealth-popular-idea-give-oil-money-people-rather-than.html

3. https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=IQ